Lifetime Financial Security
Submitted by Andy_B on Tuesday, 14 September 2021 Page Views: 185
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What affects financial growth?
There are many factors that affect the measure of financial growth, such as: interest rates, investment returns, inflation rate, and investment fees.A particularly important factor is the return on your investments, because it measures how much you earn from your original capital. If you invest in a savings account with a low interest rate or even negative interest rates, then your money will not only fail to grow but may actually decrease over time due to inflation (the speed at which prices increase). On the other hand, if you invest in stocks or mutual funds then there is significant potential for higher returns and therefore more growth opportunities. However, this is not without its risks. For example, if you invested in the stock market ten years ago and have since lost money on average every year since then, your growth would be negative and you may want to reconsider your investment strategy.
How can financial growth be measured?
Financial growth can be easily calculated as long as one has access to the necessary information. You will need to start with the amount of money in the account at some point in time (usually beginning of a measurement period) and end with the amount of money in the account at some point later on (usually end of a measurement period). If you do so for multiple accounts such as an individual savings account, checking account, credit card bill payments, home equity loan/line of credit, 401(k), and car loan then you can easily calculate your total financial growth. The next step would be to determine how much money you have saved as a result of these transactions, which may include: financing costs (interest payments on loans/credit card balances) or equity (the difference between the value of the asset used for financing and its original price). For example, if an individual uses their home equity line of credit to purchase a new car and finishes paying off that line after 3 years, then they will have paid $8,000 ($10,000 minus the $2,000 in interest from what they already paid back at closing). This calculation can be extremely useful for people who want to know exactly how much financial resources they have at any given time and how much they're spending.What is lifetime financial growth?
Lifetime financial growth is the total financial increase for an individual from birth to death. This includes all of an individual's assets and liabilities at any given point, such as credit card debt or 401(k) account balance. However, since most people don't even make it to retirement age without either dying or filing bankruptcy, lifetime financial growth starts at some arbitrary midpoint in life. For example, this article will assume you have been alive for 24 years so we'll start measuring your money when you turned 18.How do I calculate my lifetime financial growth?
To calculate the amount of money you currently have versus how much you started with (your initial equity), just take the difference between your current total assets and debts. Then subtract the date you opened the account. This will reveal your increase/decrease in value for that financial resource over your lifetime. For example, if you started with $0 and now have $30,000 saved up in your checking account then the difference is $30,000 and this represents how much money you've earned by saving towards a goal throughout your life.If at some point during those 24 years of life you took out a car or student loan to pay for school or buy a car then that means money went out of your pocket into someone else's bank account (the finance company from which you got the loan). If this was not part of an educational program, it could be considered an unnecessary expense because all money at the end of that education should be considered an asset.
