10 habits that fuel your financial growth
Through John Rampton
Unless you’re in the small percentile of people who have received a large inheritance or trust fund, or won the lottery, you need to Build your wealth completely new. And that’s not the easiest goal. With wages stagnating, debt growing and the cost of living soaring, this seems hopeless. However, if you develop the following 10 habits, you can propel your financial growth to the finish line.
1. Set life goals
“What is financial freedom to you?” asks Matt Danielson over at Investopedia. “A general desire for it is too vague a goal, so get specific.” Jot down “how much you should have in your bank account, what the lifestyle entails, and at what age this should be achieved,” suggests he before. “The more specific your goals are, the more likely you are to achieve them.”
“Next, count backwards to your current age and create financial milestones at regular intervals,” adds Danielson. “Write everything down neatly and put the target sheet at the very top of your financial folder.”
2. Live within your means
Living below your means does not mean being a “cheap” or missing out on life experiences. Rather, “it just means you’re spending less than or equal to what you’re making each month,” he explains Deanna Ritchie, Financial Editor at Due. “As a result, you’re not going into debt by living on plastic. And more importantly, this will help you Create a more stable financial future.”
“Of course, living within your means requires discipline and a little sacrifice,” adds Denna. “However, if you stick with it, in addition to debt avoidance, you will reap the following rewards.”
- Less stress and anxiety;
- It makes you more successful and healthier;
- You won’t obsess over your credit score;
- The ability to build wealth;
- You have more freedom;
- You have financial security.
That’s all well and good. But how can you realistically live within your means without depriving yourself? Well, here are a few suggestions.
- Create a budget using the 50/30/20 rule: Here you spend 50 percent of your net income on essentials like food and housing, 30 percent on desires and 20 percent on your savings account.
- Save your money before you spend it by automating your savings: In other words, when a percentage of your paycheck goes straight into a savings or retirement account, pay yourself off first.
- Eliminate frivolous expenses: This includes gym memberships that you never use.
- Stop maintaining the Joneses: They may put on the facade that they are doing well financially. But in reality, they could be seriously in debt.
- delayed reward: An example would be waiting for a sale or discount instead of paying full price for groceries, clothing, electronics, or travel.
- Change the nature of your debt: Make debt repayment more convenient for you. Examples could be negotiating a better interest rate with lenders or consolidating debt.
3. Build a solid cash reserve
Even if this is not the case in most minds, an emergency can pay off.
Consider the following scenario. Your work vehicle will not start if you set off early in the morning. Turns out you need a starter. Between the replacement and the job, you’ll get $400 back.
This should of course be taken into account a financial emergency. After all, you need this vehicle to bring bacon home. The problem? You don’t have the money on hand to pay these costs. So you have to load this onto your credit card – which means that you now also have to pay back the high interest on the card.
A cash reserve for such emergencies gives you security. And, more importantly, it helps prevent you from getting buried in debt.
In a perfect world, you should have three to six months of living expenses stashed away. But putting any amount aside is better than nothing. For example, if you have $300 in a rainy day fund, you only need to load $100 onto your card.
4. Use debt strategically
Many financial experts advise you to avoid debt at all costs. But not all debt is bad. For example, if you want to buy a car or a house, you need good credit. By applying for a credit card and using it responsibly, this goal can be achieved.
You can also use debt to your advantage to get an education, buy property, or start and/or grow your business. An example of not using debt strategically? Well, if you’re maxing out your credit card for VIP tickets to a music festival when you can’t pay the balance, you need to avoid debt.
5. Have an investment plan
After building an emergency fund to deal with the unexpected, it’s time to get your investing game going.
“There are many, many different options for investment accounts,” notes Alicia Dion, a personal finance expert. However, all of the different accounts you see really fall into two categories: retired and non-retired.
“A big mistake first-time investors make is thinking they’re too young to be thinking about saving for retirement,” adds Alicia. “But investment and provision actually go hand in hand! Investing is a tool to build wealth. Retirement is an inevitable part of life requires wealth.”
If you “want to get the most out of your investing experience, start saving both short and long term goals,” she advises. “While retirement is an important thing to save for, it’s not usually the only financial goal. There are short- to medium-term unavoidable expenses that can also be financed through investments.”
“It’s crucial to understand the account type that best suits your goals,” says Alicia. “Then you know that life will throw all kinds of expenses at you, use your investments to fund them.”
Retirement accounts come in all shapes and sizes. The most common types of retirement accounts include 401(k) and IRAs. Often these are plans that your employer compares. But there are Retirement provision tailored to entrepreneurs and small business owners.
After you customize these retirement plans, you should consider that as well contribution to a pension. This can complement your other retirement accounts while providing a guaranteed lifetime income.
For non-retirement accounts, consider investing in stocks, bonds, or exchange-traded funds (ETFs). To get your feet wet, you can also employ robo-advisors to do the legwork for you. If you are married, you should look for a joint custody account. And if you have kids, explore options like 529 plans and UGMA/UTMA accounts,
The most important takeaway is that you have one diversified investment portfolio to mitigate risk while maximizing your investments.
6. Get more for your money
Your mileage may differ, but this is nothing short of a buy for value. For example, for the summer you need a pair of flip-flops nearby. Instead of shelling out the $50 for a decent pair, buy a cheap pair from the dollar store.
I’m not being disrespectful to dollar stores here. The point is, these flip flops might make it through the summer. In return, you have to constantly replace them. The cost of replacing shabby footwear is likely to be higher than if you only spent the $50 to begin with.
At the same time, you don’t have to discard a $200 pair of flip flops. That just sounds exaggerated. And you may be sacrificing quality for an expensive brand name.
7. Take advantage of your benefits
If you are self-employed, you can do without it. If not, go through your employer’s pension plan carefully. Not only may you be missing out on free money, but your employer may also offer benefits beyond retirement.
Here’s what to look for:
- farewell game
- life or disability insurance
- Health Savings Account (HSA)
- Employee Stock Purchase Plans (ESPP)
- legal advice
8. Expand your financial knowledge
Stepping into the field of finance can be intimidating and overwhelming. But if you want to become more financially stable and control moneythen you must continue to educate yourself on topics ranging from tax deductions and investments to retirement provision.
How you go about doing this is entirely up to you. But you can’t go wrong reading financial books, following authority figures online, or taking online courses. You should also sit down and pick your financial advisor’s brains.
9. Look for other sources of income
Having multiple different sources of income can be extremely beneficial. For starters, if you’ve lost one source of income, you can fall back on the others. Another benefit is that you can use the extra cash flow to pay off your debts or add to your savings.
A part-time job immediately springs to mind. This would be if you are freelance or take a second job if you have the availability. This could work temporarily, for example if you want to quickly earn some money for a vacation. But that can be exhausting.
The answer? Aim for passive income. You still have to put in some work, but eventually you’ll make money without trying too hard. Some ideas would be renting out a vacant bedroom, selling an information product, annuities, or launching an e-commerce site.
10. Make your health a priority
“Finance and health are inseparable,” writes Kate Underwood in another Due post. “After all, healthcare costs money, and making money is a lot easier when you’re healthy. You may think that you just don’t have time to focus on healthy habits like eating a balanced diet, exercise or sleep.” “However, you might change your mind when you consider the many financial reasons for prioritizing your health. “
First of all, you are less likely to get sick and miss work when you are healthy. I know that’s a big deal when you’re a freelancer. If you miss a day of work, you don’t make any money. If you’re employed by someone else, working too many days could prevent you from getting a raise or promotion.
Second, there are long-term implications. With healthcare costs rising, those expenses can be reduced tomorrow by taking care of yourself today. So make adequate sleep, a nutritious diet and regular exercise a priority.
The Epoch Times Copyright © 2022 The views and opinions expressed are those of the authors only. They are provided for general information purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or other personal financial advice. The Epoch Times assumes no liability for the accuracy and timeliness of the information provided.