By following good habits, you will be able to drive your financial growth to the finish line. (Ghing/Shutterstock) Unless you’re in the small percentile of people who have received a large inheritance or trust fund or won the lottery, you need to build your wealth from scratch. And, that’s not the easiest of goals. Between stagnating wages, growing debt, and a considerable increase in the cost of living, this seems futile. However, if you develop the following 10 habits , you will be able to drive your financial growth to the finish line. 1. Establish Life Goals
“What is financial freedom to you?” asks Matt Danielson over at Investopedia . “A general desire for it is too vague a goal, so get specific.” Jot down “how much you should have in your bank account, what the lifestyle entails, and at what age this should be achieved,” he suggests. “The more specific your goals, the higher the likelihood of achieving them.”
“Next, count backward to your current age and establish financial mileposts at regular intervals,” adds Danielson. “Write it all down neatly and put the goal sheet at the very beginning of your financial binder.” 2. Live Within Your Means
Living below your means doesn’t mean being a “cheapskate” or missing out on life experiences. Rather, it “simply means that you’re spending less or equal than you’re making each month,” explains Deanna Ritchie , a financial editor at Due. “As a result, you aren’t putting yourself into debt by living off of plastic. And more importantly, this will help you create a more stable financial future .”
“Of course, living within your means requires discipline and a little sacrifice,” adds Denna. “However, if you stick with it, you’ll reap the following rewards, in addition to avoiding debt.” Less stress and anxiety;
It makes you more successful and healthier;
You won’t obsess over your credit score;
The ability to build wealth;
You’ll have more freedom;
You’ll have financial security.
That’s all well and good. But, how can you realistically live within your means without depriving yourself? Well, here are a couple of suggestions. Create a budget using the 50/30/20 rule : This is where you spend 50 percent of your take-home income on essentials like food and housing, 30 percent toward wants, and 20 percent into your savings account.
Save your money before you spend it by automating your savings : In other words, pay yourself first where a percentage of your paycheck goes directly to a savings or retirement account.
Eliminate frivolous spending : This includes the gym membership that you never use.
Stop keeping up the Joneses : They may be putting up the facade that they’re financially well-off. But, in reality, they could be in serious debt.
Delay gratification : One example would be waiting for a sale or discount instead of paying full price for groceries, clothing, electronics, or travel.
Change the nature of your debt : Make paying back debt more convenient for you. Examples could be negotiating a better interest rate with lenders or through debt consolidation.
3. Build a Solid Cash Reserve
While not on the top of most of our minds, having an emergency can pay dividends.
Consider the following scenario. Your work vehicle doesn’t start on you going to leave bright and early in the morning. Turns out that you need a starter. Between the replacement and labor, that’s going to set you back $400.Obviously, this should be considered a financial emergency . After all, you need this vehicle to bring home bacon. The problem? You don’t have the cash on hand to handle this expense. As such, you have to put this on your credit card—which means you now also have to pay back the high interest on the card.Having a cash reserve for these types of emergencies gives you peace of mind. And, more importantly, it helps prevent you from getting buried under debt.In a perfect world, you should have three to six months’ worth of your living expenses stashed away. But, having any amount set aside is better than nothing. For instance, if you have $300 in a rainy-day fund, you only have to put $100 on your card. 4. Use Debt Strategically A lot of financial experts will advise you to avoid debt at all costs. But, not all debt is bad. For example, if you plan on buying a car or home you’ll need good credit. So, applying for a credit card and using it responsibly can achieve this goal.You […]
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