Wealth is an interesting thing.
So many people want to have more money in the future, yet they rarely assess how they are currently spending it and the financial mistakes they may have been making their whole lives.
Perhaps these habits have been passed down from their parents. Whatever the case, in order to understand the principles of money management and wealth creation, you’ll need to first form better money habits, starting today.
Get Started with These Saving Tips
The number one step to better money habits is to save part of your money. Educate yourself, check rates, and learn how interest works.
If you haven’t opened one or two saving accounts and automated them, now is the time. This is also an easier way to form better money habits over time without thinking about it or taking too much action yourself.
Pay Yourself First
First, you must understand one of the most important rules of finance: you should pay yourself first.
This means that when you get your monthly salary, and know that part of it goes for rent and essentials, but then immediately include another element (aim for 10%)— your saving. This must be something you take as seriously as your rent, bills, and food expenses.
Brian Tracy, a top financial guru, suggests you open an account today and deposit the first sum of money, no matter how small. Then, write down your goals in numbers and make a savings plan. This will be one of the most crucial plans you ever create. Following it and sticking to the rules you set for yourself means you’ll have more resources in the future. This is the foundation of building wealth.
Once saving has become a weekly (or monthly) habit of yours, it’s time to keep track of your money. Budgeting is not just something business owners should care about, but anyone who’s receiving and spending money. It doesn’t need to be a complicated process, either. Simply write down what you receive, and when you recieve it. Then, add another column for your expenses.
It’s best if you do weekly reviews of your spending habits. That’s the only way to realy hone in on what you’re wasting money on without realizing. To make real changes in your financial situation, such costs should be removed (or at least minimized).
To accumulate wealth, you can’t allow yourself to constantly throw money away for things you don’t really need or don’t truly enjoy. A budget is the first step to taking control of your money.
In fact, do this exercise now to get a feeling of why budgeting is so powerful.
Grab a sheet or open up a document on your computer and just write down what you spent money on yesterday or for the last 3 days. You might not have the habit of remembering your expenses, and might miss some small sums. However, these, when looking at the big picture, can prevent you from ever fixing your financial situation.
Over time, you can use a simple app, or even a software, for this. For now, though, just spend 5 minutes writing these down. Then, look closely at each and try to analyze whether each one is necessary. Look for ways to save. You might find out some important things, which will lead to cutting your expenses if you actually make some of these small changes in your daily routine.
Better money habits always include tracking, as this gives you control over what’s going on. Otherwise, you might end up spending money you don’t have, which will make your financial future worse than it is today, and progress won’t be possible.
How to Fix Your Bad Money Habits
Now that you know some saving tips to follow and are aware of why budgeting matters and should be part of your weekly review, it’s time to do something about those bad spending habits that may be ruining your brighter financial future.
What might these be?
They are the subscriptions you have but have forgotten about. The excessive eating out. The grocery shopping without a list. It’s the impulse buying. The nights out. . .
They are the little things you indulge in that give you instant gratification, whatever they might be.
These all show that you may lack discipline, but you’re not alone — this is how most of the world manages their money. They lack mindfulness and just buy stuff without thinking of the consequences and asking themselves if it’s really necessary.
So, for better money habits, you need more of the mindset of investors. These are the people who think long-term. They are very careful with each dollar they spend.
Investors know that each little decision about their finances —no matter how insignificant they may look— affects everything else.
Some of their habits can be adopted into our daily lives with the desire to accumulate wealth, one habit of which is this: set limits, and set them in numbers.
For example, an investor knows his financial situation down to the very last penny. He’s aware of what part of it he can invest. If an expense doesn’t give a return on investment within the first week or two of the month, he’ll keep his money for the last 2 weeks, so that the balance is kept.
Of course, every now and then, there will be risk. However, risk is important in order to make big wins and be a good player. Even then, though, they never let things get out of control: they make wise decisions and know when to stop.
Your Better Money Habits Can Make You Accumulate Wealth Over Time
The very first thing you need to do is clear out all your debts and loans. Don’t borrow again. It’s money you don’t have, but such transactions make us think we do and we allow ourselves to spend more. Then, it becomes a hole we fall into and digging our way out is harder than we think.
So, if you do have debts to pay, handle that first. Only follow the saving tips above once you’re back on track and ready to do something about improving your finance.
As simple as these principles sound, most people never do them for a long period of time. Money management is a serious matter that takes a lifetime to be mastered. In the beginning, it’s hard to create a system, keep track of everything, and not fall back into old patterns (your bad spending habits in this case). However, over time, you will be able to step into new spending habits and everything will change.
Creating better money habits begins with following these guidelines:
- Pay off your debts.
- Cut your expenses.
- Find ways to earn more (on the side or get a higher paying job).
- Save or invest what’s left each month.
We hope this post helped you become more aware of how you might have lost control over your finances these past several years (you’re not alone). Once you focus on where every dollar is coming from and going toward, it’s easier to make better financial decisions from there.