How To Avoid The Riches-to-Rags Debacle
Money Lessons From Boris Becker – How To Avoid The Riches-to-Rags Debacle
June 27, 2019 By Aditya
Whether you like the sport of tennis or not, you are probably familiar with the face of a former world champion Boris Becker. A flamboyant career winning 49 singles titles and 15 doubles titles paved the way for his $29 million net worth in the year 2017.
So, how do you go from a multi-million dollar net worth to bankruptcy where you are forced to auction all your trophies and awards to pay off one’s debts ?
The answer is simple — Bad Financial Planning.
While Becker didn’t turn bankrupt overnight, his riches-to-rags story is a much needed wake up call to reevaluate our finances and strategically plan for the long term. Before you lay flat on the turf, helplessly declaring your bankruptcy, let’s understand how you can avoid this massive debacle.
1. Curb Your Borrowing
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Of course there will be no questions asked, because the more you borrow, the more interest you pay. In my post Plastic Money – when debt comes disguised as wealth, I have elaborated on the calculation of interest payments on the amount borrowed and how it can lead to a huge pile of debt.
Just because you can borrow money instantly through some online portal, does not mean you can use the money to travel to the most exotic destination this summer. Live within your means and only a maximum 40% of your monthly income must be allotted to paying EMI’s towards your loans. Therefore, if your monthly income is $3000, your EMI payments should be no more than $1200.
2. Do You Know Your Savings Rate ?
If your savings rate is below 25% off your monthly income, you need to start budgeting right away and cut down on unnecessary expenses. Avoid impulse purchases the moment you receive your paycheck and plan your finances for the long term. Accounting for the following future expenses in your budgeting strategy will help you better understand attributing your savings to short term and long term goals.
Short Term Saving Goal examples : New car - House repairs - Expensive gifts for an upcoming wedding
Long Term Saving Goals examples : Child’s education - Retirement planning - Health care costs
Once you are able to visualize the amount you need in order to fund each of the above needs, the likelihood of saving more today will drastically increase.
To continue reading, please go to the original article here:
https://seekingmyutopia.com/2019/06/27/money-lessons-from-boris-becker/