Why you should follow these personal finance habits?
Most people fail to realize the significance of having financial freedom. Your money will soon go if you have poor financial intelligence or personal finance habits. It is not so important how much money you produce rather it is more valuable how much you keep on time.
I appreciate your concern about the financial condition you are going through now. It is said that people become what they think about most of the time. People have a dream of a good career which is so obvious. But most of them become unsuccessful due to having a poor financial plan.
Recommended reading: Things That Coronavirus Pandemic Taught Me About Money
It happens also because of sincerity in building personal finance habits. If you want to be financially independent, one of the cool things you can do to develop the habits of rich people. Almost 90% of the problems in our life arise from the financial crisis. Many of us do not have this lesson or even it did not teach in schools or universities.
Here are some best tips to build some habits to become financial independent.
Tip#1 Learn how to budget
Personal finance habits also include making budgeting habits. Budgeting is simply a financial plan of spending. It helps you to identify your sources of income and the expenditure for a period of time. This word gives you a better idea of where to spend and how to have financial freedom.
50/30/20 rule is one of the most popular and effective ways to determine the budget. If you want to breakdown your paychecks including taxes, card bills, or electricity bills, this principle can be very effective.
The essence of this principle is that 50% of your income goes for maintaining bills, foods, or housing. 30% of your income can be used for savings and the remaining income goes towards other issues. In this way, you can fit your lifestyle too.
Tip#2 Always have an emergency fund
People lose control over their personal finance habits because of unforeseen events. It is considered the backbone of strong personal finance habits.
The money you set aside for an uncertain event. It gives peace of mind and future financial security. As a result, the fear of losing jobs, the stress of money, or the fear of losing money can be minimized.
Do you want to live in a fear of crisis? Of course not, this emergency fund will protect you to take out loans or asking friends and family for assistance.
At least, you should set up an emergency fund for maintaining living expenses for 3-5 months. This will help you to have some time for looking for other income opportunities.
Here are some adverse situations that can make you sense to have an emergency fund-
- Epidemic situation
- Job loss
- Sudden or accidental cause
- The demise of responsive family members
- Hospital bills for severe injure of your families
- House repairs
Tip#3 Stop wasting on unnecessary things
If you truly want financial freedom, stop spending on irrelevant materials. Unnecessary spending that you do subconsciously kill your mindset to become successful. An expense like regular shopping, hanging out with a friend in restaurants change your lifestyle too much.
So you need to figure out your true needs. I mean spending in excess of what you truly need reduces your saving habits. This leads to a financial crisis in the future. Of course, you must invest in yourself for your continuous development and that should be the mindset.
Tip#4 Think twice before spending
There are two roads for you. One road directs you to earn, save, and accumulating money. On the other hand, another road leads in the direction of spending and getting into debt so fast.
Now you have to decide which roads are you going to take. The true fact is that most people like to spend without thinking about accumulation and saving. So if your spending habit becomes bigger than the savings tendency, ultimately you will fall in debt and life will be unenjoyable.
Tip#5 Get Control of Your Financial Life
The habit of saving money will eventually increase your financial balance. this is so important compared to the above personal finance habits. Within a year you could have a few hundreds of dollars. Gradually, in a couple of years, you will have a hundred of thousands of dollars.
So by developing this habit you will think more carefully about your income and savings. Besides, you can accumulate funds from your extra sources that could be selling something or money from bonuses. You will find yourself relax and cut down your debts faster than before.
Tip#6 Build Saving Mindset
Mindset is the primary element of personal finance habits. Whenever people talk about saving money, they certainly think that it is a good idea. It may mean to these people that they need to eat less or reduce the standard of living also. But what if you are asked instead of cutting down your current lifestyle, you could same the majority portion of your income.
How is this possible? Well, it’s not so difficult. By practicing some techniques and methods, you will be able to increase your income by 5% to 25% annually.
Be a self-disciple person and start building saving habits. Save at least 15% of your income for the rest of your career and be financially independent.
Tip#7 Have Financial Goals
Tracking your assets is very important. If you have a clear financial goal, your confidence and motivation will go up. Expert suggest that you should adopt short-term goals and long terms goals side by side. This can be for one year or the next five years.
Write your personal goals on a sheet of paper for example, What do you want to achieve in the next months in the next 6 months? Even you can plan for the next 1 year or 5 years. In the end, you need to evaluate your progress because tracking your financial plan helps you to take control of everything. so, take full control of these personal finance habits now. Start small and grow big.
These personal finance habits are for taking control of your money. If you are serious about these, you should consult to the financial advisor also.