Do you ever wonder how some good financial habits can change your life? Would you like to know what are they? You’ve reached the right place! In today’s article, we bring you steps to follow to change your financial life for the better. Enjoy!
Drawing up a Budget
The first thing to do is to prepare a budget, detailing all your income and expenses. We recommend that you make one per month. In the expenses box, place mandatory payments, such as housing, food, education, health, basic services, mortgage and personal loans, credit cards, transportation, etc. In addition, you can leave in this same category the hobbies, if necessary but which, at some point, can unbalance you economically.
In the income box, put all the money you have in the month and do not make plans with the money you will have in the future. Add up each of the boxes and then subtract your total income from your total expenses; the result of this operation will give you an idea of the state of your personal finances. If the result is positive, congratulations! You’re on the right track, but if the result is negative, it’s time to review the numbers and cut back on unnecessary expenses.
Organize Your Debt
Many people get into debt as soon as they enter the workforce, and from that point on, they solve all their financial problems or expenses by going into debt. This can only lead to financial disaster. Don’t let this happen to you, start organizing all your debts now. A handy tip is to write them down, from the lowest to the highest amount. Little by little, start paying off the smallest debt and use that money to pay off the next debt and so on, until you have paid off all your debts.
Plan Your Savings
Another financial habit that can change your life is learning to save. Don’t wait until you have money left over to save it, instead, plan a savings quota of your monthly income and see how your money grows. This will be easier for you with the preparation of the monthly budget we talked about in point 1.
Don’t Spend Money on Unnecessary Things
Make a list of what you need and stick to it, write down on paper or on your cell phone what you are going to buy and how much it will cost you. The most expensive purchases, put them at the end of the list, which will give you the opportunity to evaluate them. Buy what you really need. It’s that simple! If you want something that’s not on the list, write it down, put the price on it and then evaluate it. Avoid impulse buying.
Practice the 80/90 Rule
By using only 80 or 90 percent of your salary and saving the rest, you will be faced with one of the financial habits that will help you completely change the way you manage money. For example, if you earn a thousand dollars a month in cash and imagine earning only 800, you will save $2,400 a year. Allocating a portion of your paycheck to savings will provide you with an emergency fund, as well as promote this valuable habit.
Invest in Financial Education
When it comes to investing, it’s not just about money, it’s about time. In college, they never teach how to manage personal finances, so it’s important that you make the decision to educate yourself financially. The basics of having good finances are saving and investing.
Achieving Financial Freedom
Financial freedom is more than just having money. It’s the freedom to be who you really are and to do what you want to do in life. Being financially free involves completely changing your financial habits and, for that reason, it is a process that can take years or even a lifetime. However, it is important to educate yourself financially, adopt good habits and get on the path to financial freedom.