Based on an article published on the NYTimes.com, the American middle class is no longer the world’s richest. They used to be the most affluent in the world. But now, they are trailing behind other developed countries. The article mentioned that the overall economy of the US remains to be strong and recovering. Although the recent recession caused a lot of difficulties in the past few years, it is still going strong compared to other nations. However, the rising financial difficulties of the middle class seem to stem from the growing inequality of income. Simply put, the US economy may be gaining strength but only a small percentage benefits from it. The rest of the country is still feeling like they are in a financial crisis.
In truth, the relationship between your debt crisis and your income level will have an effect on your financial confidence. In most cases, it might even lead to the aggravation of your financial situation. While this relationship will have to be closely monitored, you need to consider two important issues that might be contributing to how you perceive your finances.
2 issues to cutback on to stop feeling like a financial failure
When it comes to money, being subjective is not always advised. But in some instances, you need to try and alter your opinion so you can change your mindset. That is an effective way to survive certain financial situations that are beyond your control.
For those who are in a financial crisis, it is tough to be optimistic. We live in a consumerist society wherein money is an important measurement of our success. But did you know that you can live in such a world without necessarily having to worry about your finances day in and day out? Even if you are not part of the high income group, it is possible for you to not feel like you are deep in money problems.
The key is to lower two things: your expectations and your standard of living. Some people will immediately go to cutting back on their expenses to help survive their financial situation. While that is true, it will come with an inner battle because you do not understand why you are making all these changes. That is why we are highly suggesting that you lower these two issues despite the fact that they are not entirely money related.
Issue 1: Your Expectations
The first issue that you may have to lower is your expectations. We all have dreams and aspirations and most of these are manifested in our current financial standing. Wikipedia.org defines it as a belief that is usually centered on the future. It also mentions that it may or may not be realistic.
That being said, if you think that you are in a financial crisis, you may want to look at your expectations first- at least, before you make any financial move to rectify your money problems.
Here’s a situation that may help you understand the importance of revising your expectations.
Before the economic collapse in 2007, the median income was $55,627. But when the collapse happened, the median went lower and lower. From $53,644 (2008), $53,285 (2009), $51,892 (2010), $51,100 (2011) and $51,017 (2012).
Does that look like a financial crisis? It could be. Until you go way back to 1995 wherein the median income is $50,978 (inflation adjusted to present).
Some people do not realize that their expectations may be exaggerating their financial problems. You have this set notion of earning this much or owning these assets when you reach a certain age. When you fail to do that while the rest of your peers are being successful, you think that you are in a financial crisis.
But if you think about it, you are practically in the same situation as you were back in 1995. How did you survive back then without feeling like you were in a financially difficult situation?
The thing that makes people sink lower than they should is disappointment. Even if you were not able to reach your goal, keep disappointment from leading to discouragement. This will keep you from being proactive about your financial situation.
You may argue that the way of life back then was different from today. That argument is sound but not until we go to the next issue that you also need to lower to survive a financial crisis.
Issue 2: Your Standard of Living
The problem with a lot us is that our standard of living goes up as your income increases. While you definitely deserve the upgrade, you need to be very wise about it. You do not have to upgrade your standard of living if you do not have to. When you get an increase in income, you should keep your lifestyle steady and put the extra money in your savings. That is how you can set yourself up for success.
Now when you are in a financial crisis, it is obvious that you need to cut back on your expenses. Obviously, your financial problems are being aggravated by the fact that your finances cannot support your way of living. That deficit has not bloomed into a money crisis. That being said, you need to lower your standard of living.
This is probably the one that will hurt the most – compared to your expectations. This is where your material possessions and your lifestyle will be altered to suit your current financial situation.
For some people, this will be very painful to do. But if you have the right mindset, you will realize that lowering your lifestyle does not always mean you will make yourself feel deprived of what makes you happy.
Focus on quality living to eliminate the feeling of financial difficulties
If it is very hard for you to lower your standard of living, that is an indication that you may be focusing too much on the material things and the amount that supported that lifestyle. While that is natural, it does not mean it is correct. You need to take your eyes off the amount and focus on the quality of your lifestyle.
According to Investopedia.com, people usually think that when their income decreases, their standard of living does too. This is not always the case. There are other factors that should contribute to your happiness despite a lower cash inflow.
This is when you need to focus on the quality of living instead of just the monetary standard of living. For instance, if you get health care benefits, retirement contributions on top of your lower income, that is still something to boost your financial situation. It does not necessarily mean that you are in a financial crisis.
Another important difference that quality living has over standard of living is that fact that the former varies with every person. This is where your mindset will come into play. If you change your mindset to appreciate the finer yet inexpensive things in life, you will not feel like you are in a crisis. Despite the lower financial standing, you will not feel threatened or discouraged. This frame of mind should help you rise from the financial slump that you are in.
By focusing on the quality of living and not the standard of living, you will be kept from developing the habits that will threaten your financial security. That should effectively keep you from feeling that you are in a financial crisis.