Building sustainable money habits can be a pain. You’re always confronted with the allure of instant gratification, over and above all the responsibilities that being an adult brings with it. The challenge is always knowing the difference between what you want and what you need, and living within your means. In order to build wealth you will have to pick up some healthy money habits so that you can achieve financial freedom. The following habits can be thought of as the basic structures of smart money management.
- Know how much you make and how much you spend: Keep track of your spending so that you’re always aware of where your money is going. Drawing up a budget helps you identify areas where you’re throwing money down the drain and you’re also aware of what you can cut down on.
- Pay yourself first: Make savings and investments a priority when you draw up a budget. These should be way up there with car, insurance, medical aid etc.
- Spend less than you earn and save the difference: This means that you should live below your means, and try and save (invest) as much as possible.
- Be credit aware: Take very good care of any credit accounts you have. Always pay your balance in full, don’t max out your credit cards and never use debt to pay off other debt. Try and save for items instead of turning to credit.
- Plan for the future: Have an emergency fund and keep a close eye on it. Get life cover, draw up a will. Start thinking about retirement now. Don’t leave anything to chance, be prepared because you don’t know what could happen tomorrow.
- Write down your financial goals and review them regularly: Whether you want to travel, buy a car, or you’re saving for a deposit on a house, always write down your financial goals. The goal might not necessarily be a financial goal, but realising it may hinge on your financial planning. Either way, having goals you can review on a regular basis will keep you focused and on track.
- Always take the long view: don’t fall prey to get-rich-quick schemes. Make it your business to understand how wealth is created. Whenever you have money to save or invest, think long term.
Sticking to healthy money habits is difficult, but not impossible. Make it your business to understand money and know it. The more you understand it, the better you’ll be able to use it to your benefit. The business of money doesn’t have to be complicated or scary. A little education will go a long way.