Not everyone is the same when it comes to managing their personal finance. But everyone wants to become rich. You will find that people usually have two identifiable financial habits, namely, good financial habits and “wealth reducing habits”. So, every financial decision you make impacts your financial stability and consequently, how much wealth you will accumulate eventually on a long-term basis.
Let us find out seven wealth building habits that will make you live your life of retirement at ease and in peace!
7 Wealth Building Habits – Money Saving Habits
Keeping an eye on the financial habits of the wealthy is not just enough and will not make you rich. You must implement these habits in your daily life. One of the most important aspects of becoming rich is that you cannot expect to get results overnight. Have patience, perseverance, and a positive attitude is what matters a lot.
If you study the financial habits of the wealthy, you will find that there were no quick fixes or shortcuts that they did follow but over the years, little by little they accumulated wealth.
Let us find out how you can become rich, if not a millionaire but you will have enough wealth to enjoy financial sanity throughout your life. It is easier said than done but if you can really make the effort to attain your financial objectives, you might as well tour around the world after retirement.
Having said that follow this financial target for sunny days ahead.
Set a financial goal
When you talk about setting financial goals, you might say that everyone does. Yes, that is true. But how many people have you seen writing down their financial goals in a notebook? And this is exactly what you must do. Write down what you would like to achieve for the future and how much money do you plan to save in the next couple of years.
Let the goal be realistic. Do not opt for something that is difficult to achieve. For instance, if you want to be the next Warren Buffet within a few years, that is not right.
Save the cash for medical expenses, save for retirement, set aside cash for emergency circumstances, and this is how you must proceed.
Due to the pandemic, many people have lost their jobs. So, while you are still employed, understand the importance of saving for a rainy day. If not of a big amount, make sure you put your eggs in different baskets on a regular basis.
In this way, within a few years, you will have accumulated quite an amount in your investment portfolio.
Just as you invest on a regular basis, save consistently. This saving can be as simple as putting away some cash for the emergency fund or investing in stocks or any financial instrument that you think is safe.
Financial instruments that give high returns are usually risky. On the other hand, those investment vehicles that offer little return are much safer. So, depending on how much cash you have at your disposal, select the appropriate investment vehicle.
One of the good money saving habits is that you must monitor expenses. Just as a diabetic patient is asked to watch his diet and calorie intake. Similarly, if your aim is to save money, you must monitor whether or not you are going overboard with the expenses.
Refrain from spending, the moment you realize that this expense can be deferred for later.
Live on a budget
As the first step to attaining your financial stability and if you are looking for an answer to “what makes you rich”, make a note of your cash inflow. Then write your expenses every month followed by your financial obligations.
Ensure that the money you keep aside for household expenses, which may include education for kids, utility bills, grocery, cash for gasoline for your car, medical expenses, and plastic card bills do not exceed what you have allotted for each.
Often, we have to spend on social obligations like buying a gift for someone’s celebrations, and so on. If you are aware of the date, go for coupon shopping. According to experts, many households could save up to 40% from these coupons when they used them religiously and on a regular basis.
Many websites offer freebies, discounts, and reward points for shopping. If you have accumulated such points, use them for these social expenses where you have to gift something to someone.
Spend for needs not desires
This is one of the most important money saving habits that you can develop. Spend only for the needs and not for the desires or “wants”. This can be better understood with the help of an example.
If you have always longed to set off on a cruise trip with your family, you surely will but when the time is right. Now that you are in a saving mode, you cannot splurge money on a luxury. This is because it is a desire or a want, not a need.
First of all, fulfill those financial obligations that you cannot avoid.
Another aspect that you must keep in mind when you are segregating want with needs is that use plastic cards sparingly. If at all, you must use a plastic card, use a debit card. By doing so, you know how much cash you have in your bank account. So, you will be able to spend accordingly.
With a credit card, you are after all using someone else’s money. So, sooner or later you have to return the money. It sounds good or looks good when you receive a message from any banking institution that your credit limit is a starry figure. But these are just traps and nothing else.
Many people have entered into a vicious cycle of debt by using credit cards. Remember, credit cards attract very high rates of interest. So, when you are finally paying off the money you borrowed on the card, you are paying not just the principal but also the interest accrued on the card.
So, one of the good financial habits that you can develop is not to spend on credit cards or make any purchases using this card.
Many people have had to declare bankruptcy due to irresponsible financial behavior over the years. Payday loans are debt traps and if you are unable to pay the debt amount within the next paycheck day, you will have to shell out an amount that will make you regret it always.
Remember, the APR or the Annual Percentage Rate of payday loans are very high and sometimes can go as high as 400%.
If you are not able to pay-off it, you tend to take another loan to pay off the existing one that this is how the cycle goes on. You ultimately find it difficult to wriggle out of debt and you have to run from pillar to post for debt settlement or debt negotiation for years.
Also, not all creditors agree to debt settlement so you must steer clear of debt if possible.
Last but not the least, if you have had good financial behavior, the so-called financial report card that is your credit report reflects the same. A good credit score is definitely something you can boast of.