It’s amazing how much your daily financial habits can impact your bank balance over the years. Things you might not think of as being hugely influential can make a big impact over the course of your lifetime. If you buy a $3 cup of coffee each day, over 10 years that’s more than $15,000.
If you understand interest, debt, and how daily habits can make a big difference to your financial health, you will be able to make some subtle tweaks to your daily habits.
Many of the tips in this guide are easy to implement but can make you financially secure, or even help to build up a retirement fund.
Track Your Spending
This doesn’t sound like the most exciting task in the world. However, it can be easy to develop bad habits if you aren’t tracking your spending on a day-to-day basis. Looking back at the end of the month can allow you to tweak your decisions and spend differently. For instance, if you end up spending $5 a day on lunch at work, you might notice how much this adds up and start to change your habits by making your own lunch and taking it to work.
Luckily, some apps can track what you are spending. Online banking apps have started to introduce these features to keep people in control of their money.
Create Extra Income
This is not always an easy thing to do. Creating an extra income sounds simple, but if you are working full-time it can be difficult. If you’re the sort of person who is brimming with energy, you might look to create an extra income by working extra hours, taking on extra shifts, or doing a part-time job to boost your income.
In the modern age, with the “gig economy” and the option to freelance online, you might be able to fit a side gig around your existing work. If you don’t work full-time, you might be able to find flexible work in order to get more money coming in. Many people find a good money earning opportunity in the online world, for example you can start an online store of specific products.
Understand the Cost of Debt (and Adjust Your Finances)
A lot of us have debt. When you buy a home you might have to get a mortgage. You might have student debt, and you may even have credit cards.
It is important to understand what this debt is costing you. High-interest debts such as credit card debt might cost you hundreds of dollars monthly if you don’t pay it off.
You can change your habits by consolidating into lower interest lending or by writing off debt. For example, it is better to pay off debt before you put a lot of money in a savings count. The money you are saving in interest is more beneficial than interest you might earn on savings.
Avoid Making Silly Purchases
A lot of people are guilty of this. Did you know that American’s spend around $180 a month on impulse buys, on average?
Think about what you could do with the money you save on impulse buys. If you want to develop a stronger financial future then it is a good idea to avoid purchases that don’t have any benefit for the long-term, or that really aren’t needed.
Ask yourself the following questions before buying anything?
- Do I really need this?
- Can I get the same thing for cheaper elsewhere?
- Will this keep its value if I need to sell it on?
It’s also a good idea to give yourself a bit of time. Don’t buy something as soon as you see it. Give yourself a “cooling off period”. You might decide you don’t need the item after all.
Live Within (and Below) Your Means
If you are making $3,000 a month, that doesn’t mean that you should spend $3,000 a month. Even after your bills, if you just “break even” every month then you are never putting anything aside for a rainy day.
A lot of people spend as soon as they get their pay each month. If you are in a position where you need to spend all of your money to get by then this is understandable. However, if you make a lot of luxury purchases or you don’t think you are getting the most for your money.
By living within your means, you can make sure that every month you are able to put money to one side. This can make money if you invest it wisely. Similarly, it can allow you to avoid having to borrow or finding yourself facing financial problems if something goes wrong.
Create a Budget
This ties in closely with the tip above. The best way to live within your means is to budget. Make sure that your budget doesn’t account for all of your income. This way, you can make sure there is money left over each and every month.
A budget can help to stop you from spending money on things that really aren’t needed. It also gives you a full understanding of what’s coming in and going out. You can budget for luxuries, too, just make sure that you prioritize what to spend money on based on what is truly essential.
Make Money Work For You
If you are able to put money aside each month or have significant savings, then you can make this money work for you. This means that you can generate interest.
A great way to do this is to make wise investments. Though your money might be at risk when you invest, a lot of investment portfolios are built to be very safe.
Other ways of investing include buying real estate to let out to people.
You can use high-interest accounts, but these don’t tend to have the best return since the economic downturn we experienced earlier this century. It might be time to get smart when making your money work for you.
Even investing a small amount in an investment account or a pension pot monthly can make you far better off in the future, one of the essential financial habits.