Finance is one aspect of your life that’ll affect every other part. Financial security and freedom can make every other facet of your life, including your health and personal relationships, significantly better. And for that, what you need are healthy financial habits.
The earlier you get serious about your personal finance, the better off you and your loved ones will be. To help you with that, here are eight financial habits for financial security and freedom that you can start today.
1. Make a budget
Nothing else will fall else in place unless you make a budget. Calculate your income and expenses based on your financial statement from the past few months. If you want to change your financial situation, you should know where you really stand. And there are so many budget apps available that can make budgeting easier.
2. Limit your expenses
Now that you know how much you spend every month, put an upper limit on your expenses. Unless it’s healthcare or a family-related unavoidable expense, you shouldn’t go beyond this limit.
3. Automate savings
With automatic withdrawals, you can start setting up a savings fund. Setting up one will take a few minutes and once you’re done, the system will automatically deduct it from your salary. When you don’t have access to that money, you’re less likely to spend it.
4. Pay credit cards in full
Credit card interest rates are among the highest in the industry. Keep that in mind whenever you use your card and make sure that you pay your monthly payments in full. Any leftovers will carry exorbitant interest rates.
5. Reduce your rent
Rent is one of the biggest expenses that most of us have to make. Ask yourself whether you need a big apartment, especially if you’re starting out. Move to a smaller apartment or get roommates.
With remote work getting regularized, you can also move further away from your office, if it’s possible.
6. Imagine paying in cash
Here’s a neat little trick to help you cut down on your spending. The next time you’re about to buy something, imagine paying it in cash. That will suddenly feel heavier.
If you’re already paying in cash, imagine someone offering you either that product or service or that much cash. What would you choose?
7. Start investing
Earning makes you comfortable, investing makes you rich. Most people can’t comprehend the power of compounding but know that the earlier you start investing the bigger your returns will be.
Spend a couple of hours every day for two weeks to learn about index funds and retirement savings. Next step? Talk to a financial advisor.
8. Develop a secondary source of income
You can only reduce expenses to a certain extent. With an extra source of income, you’ll have more to save and invest in. If you can offer a service, you can find a market through the internet.
You don’t have to start all eight on the list immediately. Pick any two for the time being and focus on them. The rewards will encourage you to stick to every other financial habit.