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What Else Affects Your Money?

Whenever we think about money, we do it with a personalized lens. We often miss the involvement of factors that are outside the purview of our control. We being optimistic beings, deny the uncertainties that prevail in the way altogether. Though the income that you generate is in your hands the way you spend or grow it is not entirely in your control. There are external factors that have an impact on money which can only be seen when zoomed in. 

People when discussing or trying to plan Personal Finance, usually focus only on personal factors like age, risk profile, and Number of dependents. But the majority  barely even think about the external factors. It is those external factors that we'll talk about today. 

Let's see the factors one by one which can have a lasting impact on your savings and investments:

1. Economic growth in the country: 

Countries go through economic cycles. For a few years, the growth is good and for a few, it's stagnant or bad. Businesses do well when the overall economy does well, which in turn leads to better stock prices. This leads to interest rates and inflation being moderate. When the economic cycle goes downward, stock prices gets lower and inflation starts to increase..

> If you're invested in the stock market or hold some market-linked securities you must be aware of the economic cycles a nation goes through. 

2. Political issues: 

When a country has a politically stable government, the economy usually prospers. No wonder why Stock markets perform better when Mr. Narendra Modi was chosen as the PM. It's because of the stability that the govt brought. The political parties also impact the performance of the stock markets and other financial products. 

> Next time, do have a track of stock markets during the elections, it's quite volatile with people looking to predict market directions.

3. Interest rates

Interest rates determines at which rate businesses borrow and lend to the banking sector. The borrowing rate when kept lower helps businesses to take more loans with lesser interest obligation, thus helping the economy grow at a much higher pace. But, this also leads to an increase in inflation. 

> You need to put your money into financial assets which give better returns. When the interest rates are lower, it is a loss to keep money in an FD or a savings bank account. 

4. Inflation : 

The general price rise along with the weakening purchasing power of a currency is termed as inflation. When the inflation is high, the ability of consumers to buy decreases, and while the central banks raise interest rates to lower inflation, businesses are likely to show lower profits which in turn leads to falling down of the stock prices. If inflation is high,we find the returns across the assets get lowered.

> If the asset you've put your money into gives a lesser return than the inflation rate, you're losing your money. It's that simple. 

5. Other global factors :

Our economy is affected by many global issues. For eg. The war between Russia and Ukraine has created a supply-side shortage of a lot of products including Crude Oil, edible oils, etc. As you may know when prices of oil rise internationally, we face higher fuel prices too. Directly and indirectly, this pushes inflation upwards. Since the global investments also flow into India, if the countries abroad face problems, Indian investments also issues. As a result, the fate of the global economy makes our stock markets move up and down and finally could impact businesses and financial markets.

Money is affected by many more dynamic factors and having even a little bit of knowledge can make your life stress-free. Our goal at Zerobalance is to make you confident about money and we are currently working to sort all your problems around budgeting and spending. Using Zerobalance, you will be able to make payments while developing a habit of never overspending. By setting category-wise budget limits , we help you be in track with your financial goals. 

To know more about the Zerobalance, do visit www.zerobalance.club. 

Happy Spending! 

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