The dream for many young and old is to be financially free. What this typically means is that the money in savings, investments and cash on hand are enough to afford the lifestyle that you want for yourself and your family – if applicable. On top of that, that wealth has the capacity to grow further well into retirement and is big enough to support that lifestyle too.
It’s a good dream to have, but unfortunately, many people fail to achieve it.
Even millennials are feeling the pressure as they’ve witnessed two major crashes in their careers. Beyond that, there’s been increasing debt, cost of living, financial emergencies, and many other issues that prevent us from reaching our goals.
Financial trouble happens to nearly everyone out there, however there are plenty of ways for making the most of these situations as some have uncovered. In the end, many contribute their growth in these circumstances to 12 habits that we’ve listed below for you.
Set Life Goals
Even though we’ve mentioned above what financial freedom means, it doesn’t mean that is precisely your definition of it. Instead of taking our own definition without a second thought, spend some time asking yourself what financial freedom means for you? How would you describe it and apply it in your own life.
This is important, as a general desire isn’t the greatest goal to have financially on the basis that it’s not specific enough. We mean – if financial freedom means to be financially stable and not have any debt to pay, how much would that actually be? $100,000? $1,000,000?
If you have a specific target, it’s easier to work towards that and measure it by checking your bank account time and again. The more specific you make your goal, the higher your odds are for achieving it.
Have A Budget
Budgets are the backbone to any financial goal succeeding – provided that you stick to them. Of course, you’ll be making adjustments to your budget time and again as you pay off your bills and put money into savings and all that.
The principle of it is that you’re building a habit that’s reinforcing your goals and gives you the chance to resolve against the temptation to splurge.
Pay Off Credit Cards Completely
While this is probably a financial goal of yours, it’s still a good habit to get into regardless. Make a point of paying off your credit cards as soon after you make a purchase with your credit card.
Credit cards are a massive trap that so many fall into thanks in part to the high-interest rates. It kills any chance of saving up money, so it’s smarter to pay it off and to not overextend yourself.
Have Automatic Savings
This one is more of building a system that requires you to build upfront work, but then can be left alone. The whole concept is about paying yourself first. What this looks like in hindsight is enrolling in your employer’s retirement plan and taking advantage of the matching contribution benefit.
On top of that, setting up an automatic withdrawal is useful in the event of unexpected expenses should it come to that. But more importantly having an automatic contribution to both savings and other investing accounts is smart as well.
The beauty of this habit is that you can time this on the same day that you get your paycheck, so you’ll never even have to touch it. In terms of the amount, that’s highly debatable, but if you budget, you should have a general idea of what sort of expenses you have and what would be appropriate to set aside.
Bad stock markets often make people question the economy, but historically speaking, today are the best times ever to grow your money through investing. The market has always bounced back and when it does, what’s going to matter more is how much money is sitting in those investment folders.
Thanks to things like compound interest – and dividends – you can increase your wealth exponentially over time. The catch is that you need to give it plenty of time in order for it to grow to anything meaningful.
All that being said, it’s not smart to go into all this thinking you’ll be the next Warren Buffett and be rolling in money. Instead, it’s more sensible to open an online brokerage account and have a team guide you in investing and do most of the heavy lifting. Another alternative is looking into index funds.
Keep An Eye On Credit Scores
Your credit score also plays a significant role in all of this too. For one, it determines the interest rate you can get when buying a new car or refinancing your home. It also has an impact on the premiums that you’re paying for insurance as well.
Why you want to be mindful of this is because when people don’t care about their financial habits, chances are they don’t care too much about other aspects of life too.
For example, some individuals will not think twice about the idea of driving under the influence.
The thing is that those behaviors do come back in your credit report in some fashion. As such, it’s key that you get a report on occasion to see where you are standing. On top of that, if your score is around 660 or below, you need to work to build it up here and there. A score of 760 or more is considered excellent and ensures you get the best rates possible.
We can understand why many Americans are hesitant towards this, after all – haggling isn’t really something you do. However, negotiating is completely different and can work in your favor in certain circumstances.
For example, if you buy from small businesses frequently, or tend to buy goods in bulk, you might be able to ask for a discount. Oftentimes, businesses like that are willing to offer this when asked. Also, more people may be charitable during this pandemic and are looking more for helping others and reliving them in some way.
The idea with negotiating is leaving the door open for something else to be exchanged. So long as there are other things people can leverage, then it’s not a one-sided deal.
Not necessarily in your own occupation, but rather in tax laws. Every year, there are new tax laws introduced – both adjustments and deductions. In order to make the most of it, it’s smart for you to be checking the code at least once per year to look for any new changes that are rolling in.
As boring of a topic as taxes might be for you, handling this can mean saving a lot of money for you, which only improves your financial health.
Maintain Your Property
Similar to credit scores, looking after specific things in your life can be attributed to other parts of your life. In this case, maintaining good condition of your car is a good idea. But this rule also applies to smaller everyday things like the shoes and clothing you wear and other items like lawn mowers and other appliances.
Even though things may not be built to last, keeping good care of items prolongs their life significantly and it saves you so much money in the long-term.
It’s along the same lines as buying a high-quality, but expensive item. Sure, it would cost you a lot of money compared to the cheaper item, but you’ll spend more money on the cheap thing by replacing the product constantly or incurring other costs more frequently than the more expensive one.
This level of care also feeds into other aspects of your life as well. If you care more about your financial situation, you’ll take more chances to smooth things over or go the extra mile for certain things. See them more as investments, rather than costs.
Live Below Your Means
Living frugally is a choice that will change your life significantly. Being frugal though doesn’t necessarily mean only buying cheap things exclusively. To live this life to the fullest means living below your means.
It’s not all about being minimalistic or throwing away a lot of stuff you’ve accumulated over the years. Rather, it’s distinguishing between the things that you need in your life and the things you want. Being able to make those distinctions is a helpful habit that will curb a lot of impulse buying decisions.
Have A Financial Advisor
Another habit is to have a financial advisor if you can afford that for now or in case if you’re sure you’ll have enough wealth in the future. While this isn’t technically a habit, consulting them frequently is. By having an advisor on your side, you’ll be able to be guided and educated, as well as you’ll get help with financial decisions regarding all kinds of things. Financial advisors are a valuable resource to have.
Look After Your Health
The last habit is to be able to maintain your health. Like the other maintenance habits we’ve mentioned, putting care into those things builds up habits and skills that can apply in other situations. Investing in good health doesn’t just mean eating good foods and exercising regularly. It’s also getting routine checkups with your doctor, and getting your teeth cleaned. It’s also about following other health advice around situations that you can encounter.
While this too seems disjointed from personal finance, it’s key for you to see this as an investment in yourself. The healthier you are, the more you’ll take care of yourself.
And more often than not, that involves money to some extent, as you’ll have to change spending habits in order to develop that lifestyle.
Beyond that, things like obesity and serious medical conditions cause insurance premiums to skyrocket. Furthermore, if you have poor health, you may be physically incapable of working, and thus, are forced to retire or find different lines of work. This can significantly impact your income.
Adopt These Habits
While these 12 habits won’t solve all of your money problems in a flash, they can help you in building a foundation that you can rely on over time. This foundation is crucial, since in case you follow this path, you can have more financial prosperity than what you are enjoying right now.