The power of a good habit can work wonders, you can easily attain financial freedom by positively channeling how you treat your money.
Forming good money habits is actually quite simple, it just takes a few small actions and changes and you are on the path of success. Discipline and deliberate actions will help you develop good money habits which will improve your financial life.
Let us find out what these smart money habits are:
Your money will not last long if you are not aware of how much is coming in and how much is going out. Therefore the smartest, most effective money habit you should start with is having a budget. You can learn all about how to create a successful budget from my earlier post on budgeting. Remember for budgeting to be a habit you need to review it regularly and make sure that you are on track with it.
- Automate your finances
Life is busy and it’s too easy to forget about due dates of utility bills and you may end up paying extra because of late payments. Or you could be too busy making money that you forget to make regular investments to grow your money. The best solution for problems like these is automating your finances. This will ensure that your money is where it needs to be, when it needs to be there. Set up your bills and payments to get paid automatically – almost all banks and digital wallets provide this service. Also, opt for SIP or STP depending on your needs so that you never forget your investments.
- Pay off your debts ASAP
Make it a habit to start clearing your debts as quickly as possible. Start paying off your liabilities with each paycheck you get and be consistent about it. The best way to get rid of debt is to use all the “extra” or “surprise” money like bonus, gifts, inheritance etc. to pay off the debts. Also, pay off your credit cards bill in full every month – this will not only improve your credit score but also prevent the exorbitant interest that credit card issuers charge.
- Ditch daily unwanted spendings
Build a habit of finding daily expenses like purchasing coffee, or bottled water etc. that add up and eliminate them. When you stop seeing these meager expenses and tiny extravagances in isolation, you will understand that these daily unnecessary little expenditures are blocking your path to wealth. I have explained about this in detail here.
- Have clear money goals
Another important habit you need to develop is knowing what your goals are. These goals provide direction and focus as to how to utilize your money properly. The main reason people are not able to handle money properly is because they don’t know what to do with it. When you have a clarity in form of goals you find the right perspective about your financial life.
- Save before spending – Not the other way round
Set your priorities correct. Form a habit of earn, save then spend instead of earn,spend and save what’s left. The habit of opting for saving before spending will make you more disciplined and help you accumulate wealth sooner. Also, this habit will prevent you from going overboard with your spending and feeling guilty later. Like Warren Buffett said “Don’t save what is left after spending; spend what is left after saving.“
- Seek advice from finance experts
Develop a habit of taking advice from money management experts before making any major financial decisions. Think of them like financial doctors, will you take any medicine without proper prescription from a doctor? Hopefully not! Similarly you should not take any major money decisions without consulting a money expert. This will help you be less likely to take financial actions that could hurt you later on.
Its quite easy to make your money last and work for you, all you have to do is incorporate the above habits into your life. It is believed that it takes 21 days to form a habit so, why not start today?