There is no question that personal finance habits will help you improve the way you manage your money. The challenge is choosing the right one that will work for you. You have to understand that your financial situation is different from the people around you. It will be different from family members and even the people in the office.
That being said, you need to make sure that the habits you have work to your advantage. If your officemate shares that she sets aside half of her pay towards savings and it works, it works for her. It does not mean that it can work for you. She might have other sources of income you do not know about that allows her to do just that.
This just goes to show that you need to assess your current situation before you decide how to make it better. Personal finance habits take time to work their way into your life so the sooner you get started, the sooner you get to see results. In the long run, these habits should become part of your daily financial decisions.
As mentioned earlier, there are a number of habits you can look into to help you manage your finances better with great money habits. The more commit to habits that works to your advantage, the better your financial position can be. Here are a few of the habits you can look into to help you improve your finances.
Create a budget and follow it
On top of your personal finance habits should be having a household budget. This will help you manage your income and expenses better. You do not have to make a complicated budget, just start with your income and expenses. The challenge when creating a budget is making sure you include every single detail.
If you forget an income source, you could end up looking like you are always short with the money you make every month. On the other hand, forgetting about an expense item can lead to missed due dates. Not only will this force you to pay more with fees and penalties but it will also affect your credit score making it go down. Remember that your payment history comprises 35% of your score computation according to FICO.
Once you have a budget, the next logical thing to do is follow it. Sadly, there are some people who choose to still do it their own way even if they already have a budget. Much like in sports, your budget is yo4ur gameplan. If you do not stick to it and use it, you lower the chances of winning the game. If you have a budget, use it and don’t just leave it at home. This will help you manage your finances better.
Investing wisely is one of the personal finance habits to pursue
One of the best strategies to help you save for the future is investing your money. It will not help your cause if you just leave your money at home in a box under the bed. It is not also advisable to put all your money in a savings account for the simple reason that it will not earn as much compared to investing it. You can do these if this money is your emergency fund and you need quick access to it.
The reason for this is that inflation will cause that amount to shrink in value. That is why you need to invest the money which will hopefully grow more than the inflation rate. The Balance shares that the inflation rate in 2018 was 1.9%. If you were able to invest last year and it yielded over 1.9%, you were able to beat inflation.
One other idea you need to understand when it comes to investments is knowing the level of risk you are comfortable with. The risk will always be part of investments and you have to know your comfort level. The common scenario when it comes to risk and investments is that riskier it is, the bigger the potential gain. What most people do is that the older they get, the less risk they take to help protect their investment.
Stay away from impulsive buying
One of the personal finance habits you need to incorporate in your money management efforts is staying away from impulsive buying behavior. If you continue with it, it will put you in a difficult financial situation. For one, you can be in debt and would find it hard to get out because you continuously buy things you really do not need.
If you have an impulsive buying behavior, there is usually a deeper reason why you do what you do. The impulse to buy is just the result. For some people, it is the result of years of trying to live below their means. This is why it is important that you reward yourself from time to time. For some, they just want to buy things because they never had that chance growing up. If this is the case, you might want to channel that desire into something more productive like turning your hobby into an income-positive endeavor.
Do not procrastinate with payments
One of the worst things you can ever do when it comes to your finances is to procrastinate and put off your debt payments. This usually leads to more trouble as you end up forgetting or putting off payment for the next month. As mentioned earlier, your credit score will be affected as well as your succeeding payments will increase.
Once you get your statement, open it right away. You can also schedule a specific time in the day where you will attend to your payments. If you hate the idea of having to sit down, open each bill and send out payments, you can pay online. It is also possible to subscribe to paperless billing where you get the bill straight to your email. Bottom line is to not put off for tomorrow what you can do today.
Work on building an emergency fund
When you talk about personal finance habits, saving for emergencies should be on top of that list. It may not have any immediate effect on your finances but it will be a potent tool when emergencies happen. You never know when you might have to get an expensive medical procedure or even if you would be let go at work.
If these unexpected scenarios happen, your finances will take a hit. If you do not have an emergency fund to speak of, you would be forced to look for money elsewhere. More often than not, you would be borrowing against your credit or even getting payday loans. These are easy to get but extremely difficult to pay back since it carries a huge interest rate. This is why saving for an emergency fund should be a priority for you. The sooner you start saving, the more that it becomes a good financial habit for you.
Creating personal finance habits will help you manage your money better and even get you closer to your goals. You just need to find the right ones that fit your current financial situation and stick to them. If you commit to these habits, they will become second nature to you and you will be doing them without thinking too much about it.