Thus, the occurrence of any unforeseen situations immediately entails the appearance of debts and, as a result, a transition to a lower level - into a financial hole. That is, the word “instability” here speaks for itself. In this state, a person seems to have enough income to cover expenses, but at the same time there is nothing else left, so it is very precarious.
Judging by statistics and experience of communicating with different people, the vast majority of the population of our country is in precisely this state - financial instability.
Financial stability.
Financial stability is a state in which a person’s income exceeds his expenses. As a result, a person in such a state has no debts, but has reserves and savings.
Financial stability is above the poverty line, since the presence of reserves and savings always allows you to survive all kinds of unforeseen situations (for example, loss of income) without financial problems. In addition, the excess of income over expenses makes it possible to constantly increase savings and create capital. Therefore, a transition to a step back to financial instability is already unlikely here.
Having crossed the poverty line once, a person most likely will not return back.
A little about income. As you noticed, below the poverty line are people whose income is active earnings, i.e. their income depends on their activity (for example, wages for work performed). In a state of financial stability, a person already has passive income that does not depend on the results of his work (for example, income from savings - interest on deposits).
Financial independence.
Financial independence (or financial freedom)- This is the highest financial condition of a person. Its name suggests that a person does not depend on money. The income of a financially independent person significantly exceeds his expenses. Financial independence differs from financial stability in two important factors:
1. Income is predominantly passive.
2. In addition to reserves and savings, there is capital that provides this passive income.
A person who is in a state of financial independence no longer needs to engage in active earnings; he can work, if desired, for his own pleasure, and not for the sake of money. Such a person receives passive income from several sources, so the likelihood of him returning to the previous level is almost zero.
Having walked the path to financial freedom, a person will maintain this state for the rest of his life.
It is for this reason that the question “how to achieve financial independence?” worries so many people.
But, as you can see from the illustration, it is unrealistic to move from the state of a financial hole to financial freedom. The path to financial independence is a very long, labor-intensive process that requires considerable effort. Describing this path and helping people overcome it is one of the main tasks that the project sets itself. Stay with us and you will learn a lot of interesting things.
And in conclusion, I invite you, based on the material you have read, to determine your financial status and take part in the survey.
Today we will take a closer look at such a concept as a person’s financial condition.
A person’s financial condition is a special indicator that affects his position in society. In the economic literature, it is customary to distinguish four types of financial condition.
Today we will take a closer look at each type of human financial condition. Having looked at the diagram above, you may have noticed that the two lower types of financial status are located under the red line, which symbolizes the poverty line. If a person is below the poverty line, this is evidence that he is experiencing serious financial problems. When you are below the poverty line, the likelihood that your financial situation will change dramatically is extremely low.
Financial condition. Main types
Next, it is necessary to consider in detail the existing types of financial condition. The financial pit represents the worst situation of a person. Citizens in this situation have monthly income that is less than their expenses. At the same time, people in such a financial state make a very serious mistake by turning to banks to pay for current expenses. Loans only worsen the existing situation.
There is only one way to get out of a financial hole. This technique involves strict control over your expenses in order to significantly reduce them. In addition, in order to get out of a financial hole, you need to try to increase your monthly income.
The second most serious situation is financial instability. In such a situation, the amount of monthly income is approximately equal to current expenses. Due to this state of affairs, a person cannot create any reserves for a rainy day.
Practice shows that a large number of our compatriots have an unstable financial condition. This situation is twofold: on the one hand, a person has sufficient income to meet current needs, but if any force majeure occurs, such as loss of a job due to illness, etc., the person may fall into a financial hole.
The next financial condition is stability, which is located above the poverty line. You can move to this state from a position of financial instability, provided you are willing to put in some effort. To achieve such a goal, you need to strictly control your existing income and expenses.
Financial stability is a state when the available monthly income exceeds the total current expenses. Being in such a state, a citizen has the opportunity to accumulate a sufficient amount of money to create an airbag that will allow him to easily overcome various force majeure events.
In most cases, people who are in a stable financial condition, in addition to the main source of income in the form of wages, also have additional ones in the form of interest on a deposit, profits from renting out real estate, etc.
The most desirable financial state for a person is financial independence. Almost every one of our compatriots dreams of being financially independent. Financial independence represents a state of a citizen when his profit significantly exceeds current expenses. A person can boast of having several sources of income, usually passive.
In addition to savings, a financially independent citizen has investment capital, which is a source of income. A person consciously refuses sources of active income generation and works only for his own pleasure.
Once you achieve financial independence, you will remain in this state for the rest of your life. In addition, you will be able to provide a comfortable existence for your own children. This is because once you become financially independent, the likelihood of going back to your previous states is very low.
It is important to remember that to ensure financial independence, you will need sources of passive income. Only profitable investments of your existing capital will allow you to achieve your goal and become truly financially independent.
If your financial condition is currently unstable, then you should consider reducing your current expenses in order to accumulate enough cash to create not only a safety net, but also to obtain the necessary investment capital. I hope this material helped you understand the types of financial status of a person.
For a modern person, financial well-being is as important an aspect as physical and moral well-being. We don’t get anything in our life for free, except the love and care of loved ones. And we can also take care of them with the help of the material assets that we possess. Happiness and money have long acquired a directly proportional relationship. And they became an integral part of each other. A person’s financial situation affects his behavior, moral and physical condition. If we are satisfied with our financial situation, then our mood improves by itself, we feel a surge of strength and energy and experience all the charm of life. It also greatly improves self-esteem; you feel like a confident person capable of feats.
Anyone who claims that money can’t buy happiness has not been in a difficult financial situation. If you have not yet entered nirvana, then it is probably not easy for you to remain cheerful without seeing prospects.
Research
Research by UK scientists has proven that people who have accumulated debts have many more psychological problems than people with a stable income and normal financial situation. Many patients of psychiatrists and psychotherapists have one thing in common - the presence of a debt burden. They had emotional disturbances, general irritability, lack of sleep and other signs of the initial stage of depression. The purpose of this study was to show how much a person’s financial condition affects his mental health. And pay special attention to psychotherapists to help with this problem.
As it turned out, it is possible to distinguish several stages at which a person begins to suffer when a difficult financial situation occurs.
At an early stage, a person feels slight self-doubt, due to accumulated bills or minor troubles at work, which threaten him with deprivation of his bonus. Such anxiety is completely justified; a person is prone to self-criticism and, when analyzing his situation, admits his mistakes. In this case, the person is able to cope on his own, but if he is suspicious by nature, then the process of returning to a normal psychological state may be delayed.
At the second stage, the person finds himself in a difficult situation. He took out a large loan from a bank and feels all the responsibility on himself, or has encountered other problems that led to a large debt. A person begins to feel the “Sword of Damocles” above his head. In this case, nothing bad has happened yet, but the state is depressed. A person may not sleep at night. And get depressed. At this stage, it is worth turning to a professional, he will not only give advice on how to cope with the growing tension, but also help you find a way out. You can also contact a financial consultant who will analyze your financial situation and draw appropriate conclusions and make recommendations. You should not delay in solving any problem, be it your health condition or the financial situation.
The most difficult situation a person can find himself in is a state of bankruptcy combined with debt obligations. In this case, not only the psychological state deteriorates, but also the physical one. Stress is felt throughout the entire body. The person falls into deep depression, and nervous disorders begin to appear, which have disastrous consequences. This condition may be accompanied by the appearance of psoriasis. And this is a serious disease associated with a violation of the condition of nerve cells in the body.
In a depressed state, a person is capable of causing irreparable harm to himself. At this stage, the intervention of loved ones, their help and support is of great importance.
What to do?
Do not fall under the absolute influence of money and do not be its hostages. Learn to appreciate not only the material and the intangible.
To prevent a financial disaster, you should learn to control your budget, manage money wisely and correlate income with expenses. Sometimes, saving can be a good idea.
If you find yourself in a difficult situation, then you should not despair; on the contrary, you should look for a way out. Strive to find means and solutions. Maybe you should change your job, do something more profitable, or find an additional source of income. Finally turn your favorite hobby into a source of income.
You may need to take out a loan to solve your current financial difficulties. But in choosing credit programs, care should be taken so as not to aggravate existing financial problems.
To the question “ How to determine a person's financial condition?“everyone answers differently. As a rule, first of all, to determine the financial condition, pay attention to the following two points:
1. How much does a person earn;
2. What property does he own?
In fact, these two parameters in themselves absolutely do not characterize a person’s financial condition, and here’s why...
For greater clarity, let’s compare a person with an enterprise. Assessing the financial condition of an enterprise always comes down to determining whether the enterprise is profitable or unprofitable. Let's take as an example all kinds of large enterprises (factories, combines, etc.) left over from the times of the USSR. They have plenty of property, its value is in the millions, and their revenue was also in the millions. And, despite this, the vast majority of such enterprises have long been declared bankrupt, and every year the number of such bankrupts increases. Why? Yes, everything is very simple: these enterprises spend more than they earn, that is, their expenses exceed their income.
Thus, the financial condition is characterized not by the amount of income and the presence of property in property, but, first of all, by the ratio of the income and expenditure side of the budget!
The same can be applied to a person, considering him. A person’s financial condition, of course, depends on a person’s income, on how much he earns, but only by 50%. The remaining 50% is influenced by the expenditure part of the personal budget, that is, how much a person spends.
In addition, an important role is played by the presence of monetary (reserves, savings, capital) and material (property owned, business, securities, precious metals) assets on the one hand and debts, loans, credits and other debts on the other.
The presence of any debts (from bank loans to loans from friends “before payday” and arrears in payment for utilities) has an extremely negative impact on the level of a person’s financial condition. Incl. and because the use of borrowed funds in most cases involves additional expenses (interest and commissions on loans, penalties, fines for late mandatory payments, remuneration and gifts to friends who borrow funds, etc.)
Owned property and other tangible assets cannot be considered as indicators of financial condition if they are acquired with borrowed funds and this debt has not yet been fully repaid. This is especially true for property purchased for personal consumption. In this case, on the contrary, the presence of property purchased on credit reduces the level of a person’s financial condition. Therefore, when considering ways to improve your financial condition, you should think about a loan last, and only for the purpose of raising the income (and not the expenditure!) part of your personal budget, and best of all, not think about it at all.