You can live a financially comfortable life if you adopt these essential financial habits. We are going to give you the tools and tell you how to apply them it is just a question of whether you are going to provide the necessary “elbow grease” to put these habits into practice.
Keys to Financial Independence
There are people who think that you are either born rich or need to win the lottery to enjoy financial freedom but that is not the case. Everyone can enjoy some measure of financial freedom you just need to apply two (2) concepts and you will do fine. First is develop a budget, The only way you can reach your goal of financial freedom is by making a plan and start saving, save anything you can but start saving something. The more you save the less you will need in the future, save a minimum six (6) months living expenses before you do anything else. These savings are vital to give you peace of mind and stay away from debt.
Document All of Your Financial Transactions
You need to figure out where all of your money is going before you can find savings. Get receipts for everything you spend throughout an entire month then write down all of these transactions and why you had to spend money. While reviewing these sums you will realize that that premium coffee you have in the morning costs you a few hundred dollars in the run of a month. By scrutinizing all of the transactions you will be able to find savings and these savings can be put into your emergency savings fund.
Stick to Your Budget
What is the point of making a budget if you are not going to follow it? Your budget needs to be realistic and have allowances for entertainment and other activities or you will become bitter and eventually break the budget. You need to account for everything from food, rent/mortgage and transportation. If you have extra money left over at the end of the month then you can save that cash or use it and treat yourself to something you like.
Save Often and Never Stop Saving
When it comes to essential financial habits savings is by far the most important. It does not matter how much money you make it is how much you keep. The more money you can save the more stability you will have in your life. There is a simple strategy you could follow which is “pay yourself first”. This is something that most people don’t do much to their regret. When you pay yourself first those funds are set aside. If you paid everything then whatever was left would be used for savings you would have next to nothing because there is always something to take your money. Start by saving 10-20% of your regular earnings and when you get a bonus put that in there as well. Look for tax free savings accounts that will help you increase your savings without being ravaged by taxes.
Do Not Touch These Savings
Once you have the minimum of 6 months emergency savings put aside you should only use that for legitimate emergencies and not on shopping excursions. Anything you have beyond your 6 month reserve should be invested in high return investments tht will give you a better bang for your bug. The more money you save the better it will be for you and your family. This does not have to be complicated but some people get apprehensive when you mention the words “budget” and “savings” in the same sentence.
How to Track Your Progress
How do you measure your financial success? When establishing these essential financial habits it helps to have the right perspective or you could find yourself suffering emotionally. There are some people who save too much and lead a miserable life and others overspend and end up in a financial mess. What you need to do is take a balanced approach to this problem by first identifying the primary reason people cannot save money and that is debt.
- Credit cards
- Lines of credit
- High interest auto mobile loans
All of these are enemies of your financial well-being, Individuals who use these debt instruments are not able to save and since these credit facilities charge you interest you are losing money twice. The first time you are losing money is when you spend needlessly and the second is when you have to pay interest which runs contrary to the essential financial habits we have been reviewing. If you stick with the suggestions we have provided and are patient you can lead a comfortable financial life that will meet all of your needs and expectations, remember the famous song by the Beatles “can’t buy me love” so keep that close to your heart, money can’t buy happiness and you will always have a smile on your face.