It’s this time of the year that we take a serious look at our financial habits and and investigate what is holding people back from achieving our financial dreams and why people cannot achieve financial success.
Very often I realise that people have financial habits that will eventually put them in a position of financial lack of even disaster.
2020 was a year that we really had to carefully look at how we apply our financial resources.
Sometimes financial challenges aren’t solely due to unfortunate events. They usually have a foundation of poor financial habits.
With effective habits, most financial challenges can be handled. With improper financial habits, even a modest unexpected expense can be devastating.
While there are many negative financial habits one could be guilty of committing, there are a few that are especially damaging.
Beware of acquiring these poor financial habits:
- A failure to consistently save money. People that are consistently free of financial challenges have a consistent saving habit. There’s always money available to handle the inevitable financial emergencies if you save part of your paycheck each time you get paid.
- How did you manage your financial resources in 2020?
- Make a promise to yourself that you’ll save a certain percentage of each salary or portion of income.
- Excessive spending. The more you spend, the less you have to save. It’s that simple. Spending too much money makes you vulnerable and more likely to have financial challenges. Very excessive spending leads to accumulating debt, which is the ultimate financial curse. I just looked at how people started to spend more money on online purchases, as this was in some cases the only option.
- Look for other ways to amuse yourself other than spending money you don’t really need to spend.
- Put a hard limit on how much you can spend each month.
- Excessive use of credit cards and other forms of debt. Debt is a significant obstacle to financial health and stability. Debt can be cumbersome to eliminate, and most debt comes with expensive terms that make debt an especially costly way to spend money.
- Beware of debt. If you have to use debt to purchase something, especially something non-essential, it’s a good bet that you can’t afford it.
- Ignoring bills. No one likes to pay bills. Period. However, bills have a way of piling up and eventually have to be paid. During that time, you’re still spending money that should be going toward your bills. This is a huge mistake.
- Spend a few minutes each week paying your bills. Make it a ritual you perform one day a week.
- Raiding your savings, investment, and retirement accounts. There may be times that dipping into your savings or other accounts might be justified, just be sure it’s for a good reason.
- Savings accounts are for saving. Investment and retirement accounts are for saving and building wealth. They don’t work well when you take money out of them.
When last did you review your financial returns on your investments?
Well I love to use the rule of 72 in Financial Planning.
Please use this FREE-Investment Performance Calculator.
I would like to encourage you to use this very helpful tool on an annual basis to track your returns on your investments.
- No budget. Everyone needs a budget. Even a billionaire should have a budget. Budgets set financial limits, and financial limits help to prevent financial challenges.
Are you guilty of any of these habits?
Think about someone you know that has a decent job but seems to struggle financially. Count how many of the above negative habits that person is guilty of committing. Now, consider someone you know that never seems to struggle financially. How many of these poor habits do they have?
The results won’t be surprising!
Positive habits lead to positive results. Ensure that your financial habits are leading you to a place you want to be in.
Make a commitment to yourself and start the new year with implementing sound financial habits.