Whether your goal is financial independence, getting out of debt, or ensuring your retirement goes smoothly, good habits are critical for achieving your financial goals. But you don’t have to wait for new year’s resolutions to come around to start working on yours.
The sooner you begin forming a sound financial routine, the sooner you’ll start seeing real benefits.
Here to help you get started are five beneficial financial habits you can and should begin as soon as today.
1. Reviewing Your Budget Once a Month
Setting a budget is a great place to start when trying to organize your finances. However, creating a budget won’t do any good if you don’t review it regularly. It might leave you open to being caught out by rising expenses if you’re not careful.
By checking your budget at least once a month, you can ensure that it remains relevant to your current needs and situation. And by regularly reviewing your expenses, you can more easily spot what items you can cut back on, such as streaming services you no longer use.
2. Paying More Than the Minimum Towards Debts
After setting a budget, any financial plan’s next most significant priority is reducing debts. And the sooner you achieve this, the sooner you can start building wealth and working towards financial independence. Not to mention that paying off your debts sooner will save you money in interest payments.
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If you have multiple debts, it typically pays to use what’s known as the ‘debt avalanche method,’ whereby you put any extra money towards paying the debt with the highest interest off first. Then, once you’ve paid that debt, you can start putting extra towards the debt with the second-highest interest until each debt has been paid back in full.
3. Selling Your Unwanted Items
We’re all guilty of accumulating stuff that no longer has any actual use or value anymore. But all that extra clutter can soon begin to hamper your moods if left to accumulate. Thankfully, getting rid of your unwanted items will not only result in a clutterless house and a clear mind, but it might also bring in a little extra cash.
Selling old unwanted stuff has never been easier, thanks to the multitude of online marketplaces now available. And you’ll probably be surprised by how much people are willing to pay you for things that you could consider to be junk. So, there’s no reason not to add selling old stuff as a part of your spring cleaning routine.
4. Creating and Maintaining an Emergency Fund
Emergencies have a habit of turning up at the worst of times, and it only takes one or two unexpected costs to wreak havoc on any financial plan. And while investments and pensions pots can help you plan for your future, they aren’t much good when you need money fast to deal with a situation. That’s why having an emergency fund in place is crucial.
What your emergency fund looks like will depend on your circumstances. However, it should contain enough money to cover at least three to six months (preferably more) of expenses. Furthermore, you should store this fund in an easy-to-access account separate from the one from where your bills come out.
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By maintaining this fund and replenishing it whenever you use it, you should be able to protect your investments and avoid debt when unforeseen circumstances occur.
5. Paying Yourself First
Having the best intentions when you receive your monthly paycheck is simple enough. But though budgeting is helpful, the reality is that we’re all human. And as a result, it can be all too easy to spend a little more than you planned and accidentally eat into the cash that was supposed to help build your nest egg.
A straightforward way to avoid this overspending and keep your financial plans on track is to utilize the strategy of ‘paying yourself first.’
Paying yourself first means that at the beginning of the month (or whenever you get your paycheck), you deposit any money planned for investments or savings before tackling any other expenses. Doing this removes the possibility of overspending so that your financial goals are assured to stay on track. Just remember that if you habitually use this technique, you should budget carefully to leave enough money to cover your essentials.
Start Your New Financial Habits Today
The great thing about habits is that, once they’re ingrained, they don’t require much effort or thinking to keep up. But, of course, the real difficulty lies only in creating the habit in the first place.
But if you put the effort in now to make the habits outlined here a reality for you, then handling your finances intelligently will become second nature.
