📎Stabilize wealth｜Avoid the middle class from returning to poverty
1. Avoid excessive debt:
Reasonable control of debt ratio
Common excessive debts include mortgages, car loans, credit card debts, etc.
To avoid the financial pressure caused by excessive debt
Make sure your monthly debt repayments do not exceed 30% of your income
also:
Mortgage: Although real estate is an important asset, don’t go into a heavy mortgage by pursuing a house that is too big or too expensive. Choose a property that suits your financial situation to avoid a decline in your quality of life due to the pressure of monthly payments.
Credit card debt: Credit card interest rates are usually high, so try to avoid using your credit card to purchase goods or services that are beyond your ability to repay. Pay your credit card bills regularly to avoid late fees and high interest.
2. Build a strong emergency fund:
Be prepared for the unexpected
Many families will fall into trouble in the event of a sudden financial blow (such as unemployment, illness or family change), and lack of savings and emergency funds is one of the main reasons. Adequate emergency savings should be established, and it is generally recommended that emergency funds cover at least 6 to 12 months of living expenses. Make sure these savings are highly liquid funds that can be quickly withdrawn in the short term for emergencies.
Separate long-term investments from emergency savings: Do not invest emergency funds in high-risk or long-term investment tools, but keep them in bank deposits or other low-risk financial products.
3. Properly configure insurance:
Reduce the financial pressure of unexpected risks
Ignoring insurance can lead to a huge financial burden when facing accidents and sudden illnesses. Proper insurance planning is not only a protection for yourself and your family, but also can prevent you from falling into financial difficulties in times of crisis. The following types of insurance should be given priority:
Medical insurance: protects against major diseases and medical expenses, avoiding the depletion of savings due to high medical expenses.
Life insurance: Provides protection for the family's breadwinner, especially those with children or mortgages. Once the family's breadwinner encounters problems, life insurance can maintain the family's living standards.
Accident insurance: provides protection against accidental injuries and emergencies to ensure that financial crises will not be caused by accidents.
4. Invest cautiously: control risks and diversify assets
Although investment can bring wealth growth, excessive pursuit of high-risk and high-return investment methods can easily lead to significant losses. It is particularly important to maintain a rational investment strategy:
Avoid investing all your money in a single asset: Diversification is the key to managing risk. Diversify your funds into different types of assets, such as stocks, bonds, funds, and cryptocurrencies, to reduce losses caused by fluctuations in a single market.
Control risk exposure: For high-risk investments such as cryptocurrencies and stock speculation, the investment ratio should be controlled and not too much assets should be invested to ensure that even if market turmoil occurs, it will not cause a fatal blow to the overall financial situation.
Review the investment portfolio regularly: Adjust the investment portfolio regularly based on market changes and personal risk tolerance to maintain the robustness of the investment plan.
5. Cultivate rational consumption habits:
Live within your means, avoid consumption upgrades, and be wary of long-term consumption
As incomes rise, many people fall into the trap of “consumption upgrades”, which means constantly improving their quality of life and buying luxury goods that exceed their real needs. It is very important to avoid falling into the consumption misunderstanding of the “pseudo-middle class”:
Avoid excessive pursuit of famous brands and luxury goods: Rationally assess your own consumption needs and avoid unnecessary high consumption due to comparison psychology and face issues.
Make a budget plan: Set a reasonable spending budget every month and stick to it to ensure that your spending does not exceed your income.
Delay gratification: When purchasing large-ticket items, give yourself a "cooling-off period" and think for a while before deciding whether to buy, to avoid impulse buying.
6. Establish long-term financial planning:
Set clear goals and move forward steadily
Lack of financial planning will make people lose direction in wealth management. Middle-class families should plan their finances from multiple perspectives, including savings, investment, retirement and children's education.
Set long-term financial goals:
For example, buying a house within 5 years, saving for children's education within 10 years, planning retirement savings, etc., setting clear goals can help you better arrange the use of funds.
Regularly evaluate financial status: Evaluate the family's income, expenditure, savings and investment status every year to ensure financial health. Adjust the financial plan based on actual conditions.
7. Continuously improve professional skills:
Stay competitive and increase revenue streams
In an unstable economic environment, a single source of income is vulnerable to shocks. Continuously improving professional skills and enhancing workplace competitiveness can help you find new opportunities more easily when you lose your job or your industry changes. At the same time:
Diversify income sources: Gain additional income through side jobs, part-time jobs, or investments to reduce reliance on a single source of income.
Lifelong learning: Maintain a habit of learning, pay attention to industry trends, adjust career plans in a timely manner, and ensure that personal abilities keep up with the needs of the times.
8. Focus on health management: reduce future medical expenses
Health problems are often one of the main reasons why middle-class families fall into poverty. Health is the greatest wealth, and good living habits can not only improve the quality of life, but also reduce future medical expenses.
Regular physical examinations: Regular health examinations can help detect potential problems in a timely manner and avoid serious health problems and high medical expenses due to delayed treatment.
Maintain a healthy lifestyle: eat a healthy diet, exercise, and maintain a good mental state to reduce the risk of disease.
9. Transparency in family financial management: The whole family participates in financial planning
Lack of communication and collaborative financial decision-making among family members may lead to waste or improper use of funds. Ensuring good financial transparency among family members can effectively improve the efficiency of family financial management.
Communicate financial goals regularly: Spouses and adult children should communicate regularly about family financial plans and spending to ensure everyone has a clear understanding of the family's financial situation.
Shared responsibilities: All family members should understand and assume corresponding financial responsibilities to ensure that family spending does not deviate from the established goals.
By avoiding these improper operations and adopting a sound and diversified financial strategy, families can effectively resist external economic risks, maintain long-term financial stability, and avoid the risk of falling back into poverty.
