Good financial habits are the building blocks of your financial stability and financial security. Financial habits simply implies to making small changes in the way you manage your personal finances.
When I got into my first job,I was not much aware about the personal finance world. Slowly and gradually, the picture became more clear and the financial habits that I adopted few years back, are still helping me to handle my finances in a better and a disciplined way.
There is nothing magical you need to do, only a positive attitude and a simple change in your mindset can transform your thoughts into good financial habits.
So,don’t miss these 6 Financial habits that are really essential for your financial growth :
6 Financial Habits that are essential for your Financial well-being
1. Have a Budget and stick to it :
This is the first and the foremost financial habit that you need to build. Budgeting is the stepping stone towards your financial freedom. Simply stated, a budget is an estimate of your earnings and expenses during a particular period of time. If you have a fixed budget, you can approach your financial goals easily.
Set a budget for yourself based on your :
- Monthly Income : How much is your regular income ? Do you have any alternate source of income or passive income as well ?
- Monthly expenses : Rent, Mobile bills, electricity expenses, Loan EMIs, Groceries, clothing, entertainment etc.
- Monthly Savings : How much can you practically save from your monthly income ?
You can anyways make minor adjustments to your budget as per you convenience. But, not having a budget is no excuse.
2. Live within your means :
This is another financial habit that if ignored can land you in financial troubles, if not now may be sometime later. So, follow this simple rule : Earn more and spend less. The earlier you learn this, the happier you will be.
“ Beware of little expenses. A small leak will sink a great ship ” as quoted by Benjamin Franklin.
Few simple ways to live within your means are :
- Avoid impulsive buying and control your emotions while spending.
- Avoid overspending with your credit card.
- Keep track of your expenditure on regular basis.
Once you make yourself aware of how to spend less, you can start putting money aside to secure your future.
3. Pay all your bills on time :
This is a small but a very crucial part of your financial life. Sometimes, things get delayed just because of our laziness or not having enough time for it. Timely submission of any kind of bills before their due date is a very good habit that brings financial discipline and keeps you organised.
You can anyhow pay your bills with late charges and penalties, that might not seem to be very high to you. But, why to pay extra when you can avoid it by simple management.
There are so many ways to make sure your bills are paid on time :
- Set reminders on your mobile.
- Automate the payments of your bills.
- Check your accounts regularly so that you don’t miss paying out any important bills.
4. Debt Avoidance and Debt Elimination :
Getting yourself in debt is quite easy. As and when you start spending in excess of your income, you start borrowing money whether from your friends, relatives or loans from banks etc. Or we can say when you ignore the above habit of “living within your means”, you land yourself in debts.
Debt avoidance and Debt elimination are two different matters to be dealt with. So, if you avoid debts at the first instance only, you can improve your financial situation.
Debt has to be paid back, that too with high amount of interests. So, why not avoid it before it becomes a financial burden for you.
Even if you have some debts especially the credit card debts, for any reason whatsoever, you should try to eliminate them to lead a healthy financial life.
5. Building an emergency fund :
Don’t take this just as a financial habit, but it’s the need of the hour. Anybody can face financial emergencies and if you have sufficient backup for yourself and your family, then there is nothing to worry about.
Emergency fund, is the one where the money is readily available whenever you need it. e.g. any medical emergency where you need the funds immediately.
Besides savings accounts, you can explore other investment options like fixed deposits and liquid debt mutual funds based on your goals.
Once you have an emergency fund of at least 4-6 months in place, you can plan to save and invest for your long term objectives.
6. Retirement planning :
Here comes the most important part, not only a financial habit but a crucial part of your financial portfolio. Retirement planning is one of the long term objectives. You should start planning for your retirement at a young age to reap the benefits of compounding over the years to come.
Saving even a small amount now will eventually add up and you can enjoy its benefits post retirement. The sooner you plan for your retirement funds, greater will be the benefit that you will derive out of it.
Investing your money towards your retirement and growth goals now will definitely pay you off a big sum as compared to investing at a later stage.
What is important is to organise all the aspects of your personal finance, now whether you ‘Do it yourself (DIY) or with the help of an experienced Financial planner‘ is upto you. Taking expert advice for building a solid financial plan can be more fruitful than experimenting things yourself.
A final note :
We all have numerous dreams and developing good financial habits, to fulfill them is not as difficult as it seems to be. A strong determination followed by systematic financial planning can help you take the right financial decisions at the right time.
It is never too late to change your financial habits for your own betterment. If you adopt these financial habits and learn to manage your money effectively, you shall definitely lead yourself towards a smoother road to financial freedom. (Read : ‘Are you on the right path to achieve your Financial Freedom?‘)
Which financial habits you already have ? Which are the ones you need to work upon ? Any other financial habit you want to include in the above list, do share with us.
About The Author : This is a guest post by Harleen Kaur, a Chartered Accountant & a Finance blogger who runs a personal finance blog @ Fintrakk.com, which aims at simplifying things in the field of Finance & Taxation for the common man.
(Kindly note that Relakhs.com is not associated with Fintrakk. This is a guest post and NOT a sponsored one. We have not received any monetary benefit for publishing this article.)
(Post published on : 15-November-2016) (Image courtesy of Stuart Miles at FreeDigitalPhotos.net)