Excellent personal finances are a sign of a good financial culture. Similar to eating habits, exercising, reading, and many others, good finances are a reflection of good habits.
Our finances can be seen as tools that allow us to achieve personal goals. It is simple to say and laborious to achieve, as it involves designing strategies like the ones that we will cover below!
Habits are the behaviours that we do almost automatically by having them ingrained from consistent replication. The bad ones are difficult to eliminate, mostly because we have trouble detecting them. Let’s review some of the bad habits.
You Have Dreams, But Are They Goals?
The first bad habit is mistaking dreams for goals. While dreaming does not require much effort, the goals imply that execution must be put in place in order to achieve the ultimate result. Most goals that we set are objectives in time and are realistic strategies that allow us to fulfil them.
Specialists point out that the first bad habit is not setting proper financial goals because it is easy to get out of the way of financial health if you are not clear about the restrictions that having a specific goal or objective implies. Simply put, our financial decisions will be subjective to your goal.
Not Having Control Or Record Of Expenses
This is probably the most common of bad habits, as it is sometimes difficult to keep track of what you are spending day to day. The problem with not recording your expenses is that you are not sure what your expenses consist of when analyzing your financial records.
If you don’t know what you spend on, you can’t know if you can optimize your money to make it more profitable or allocate a good percentage to savings and investments. Fortunately, technology can help you as there are applications to control your expenses in a more efficient manner.
You Do Not Know How To Use Your Credit Card
You have one of the worst financial habits if you are an impulsive, emotional, unwary, careless, and unpredictable shopper. Also, you probably use your credit card without much awareness.
Unfortunately, it is common for people to spend money with the use of a credit card, but the truth is that the money is not truly theirs to use. The use of debt is sometimes leveraged in order to purchase goods, but there’s more to that than you think! The use of credit cards bears high interest payments and in most cases is used to purchase a liability opposed to an asset.
In that sense, those purchases are made to satisfy an immediate and temporary desire. The best way to overcome these types of purchases is to make a monthly budget and try not to get out of it. Use your credit card only for expenses that are worth it and try to pay off your debts before purchasing new ones. Never use your card as extra money, as it is a financing instrument that includes a price for using it (interest).
You Don’t Save Or Invest
The cost of living is currently very high, but saving or investing is not a luxury, they are essential actions. Both decisions require long-term commitments, but the truth is that they are very profitable over time.
There are different savings schemes, but the safest are those offered by specialized institutions since it is very dangerous to have the money stored at home and in a savings account without benefits it will only lose value concerning inflation.
Investing is always a little riskier than saving, but the dividends are also better. You must define what type of investor you are and follow the advice for that type of investor. There are no zero-risk investments, but the profitability makes it more attractive than simply saving.
You Don’t Live Within Your Means, And You Don’t Have A Financial Cushion
Not living within your means implies a deception of ourselves. The bad thing is that it will never reach you, you will pay late and spend more in interest, you will always reach the fortnight with the bank account at zero, it will be difficult for you to meet your expenses, you will live up to date, and you will not be able to save or invest.
Not having a financial cushion implies that any emergency or eventuality may affect your stability and have repercussions in situations that are difficult to overcome.
Effective Tips To Ensure That Your Finances Are Well Managed
As a working professional with a family, your salary may be a fixed rate. On the contrary, there are bound to be many fixed expenses that you have to incur every month. While you can draw up the total cost, there are also chances of sudden expenses for which you need to be prepared. Create a budget and put it in place immediately in order to track the inflow and outflow of your personal finances.
The basic list will contain your utility bills, insurance premiums and monthly grocery costs. If you can maintain that list in actuality, the other aspects of saving as against the total salary can be handled efficiently. Prepare your budget with a figure that exceeds your fixed costs and is lower than your salary, which will ensure that you can save effectively.
Savings Accounts And Investments
In addition to your checking account, it is a good idea that you also open a savings account. This will ensure a monthly or yearly interest (variable upon banking institutions), which in turn ensures that you can meet sudden expenses. In your budget include an amount that you will contribute to your savings account regularly.
If your buffer amount and interest on the savings account are high, try to make investments in the stock market or other investment areas. If you apply thought and also take the assistance of professionals, the returns on these investments can be quite impactful over time.
Reduce Utility Bills
Your innovative ideas can help you save a substantial amount of money on your utility bills. The use of home appliances that use very low energy have become very popular today. Lights, fans, and kitchen appliances have integrated low energy alternatives, which in turn will reduce your electricity bills.
Using solar panels on your roof will again reduce your energy consumption in the long run, and you will be able to save more in years of retirement. Such measures may seem to be unrelated, but they can contribute greatly to your overall financial management. Look around your house and check if you can substitute certain appliances with eco-friendly ones. Not only will that measure reduce environmental damage but also ensure your savings.
Spend better, save better, and build your way to a better financial future with these short tips!