If you’re like more than half the adult population, you’ve made a New Year’s resolution to get your finances in order.
That’s a great start, but unless you do things differently to what you’ve done up till now, why should anything change.
But if you change your money habits, then your outcomes will change.
So let’s look at 17 good money habits you could adopt.
But before we do, let’s me share:
The 4-step formula to financial independence:
The rich obey four timeless rules for achieving financial freedom.
So please don’t dismiss them because they sound so simple:
1. Spend less than you earn.
This maxim may seem obvious, but many people have difficulty following it.
If you’re spending more than you earn, you will never become financially independent.
You will be paying money to others for the rest of your life.
The earlier you start living by this rule, the better.
It is never too late to start.
2. Invest the difference wisely.
I’ve already explained that while many Australians will earn somewhere around $8 million during their working life, many will retire poor.
Clearly the level of your income has no bearing on the level of wealth you achieve, what is critical is the amount that you save and how you chose to invest it.
3. Reinvest your investment income so that you get compounding growth.
You will never become financially independent on your earnings alone, you need to keep reinvesting.
In fact, by the time you become financially free almost all of your assets will have come from compounding capital growth, not from your income, your savings or your rent.
4. Keep doing steps 1 and 2 until your asset base reaches a critical mass.
This means you will build a cash machine that provides the income you desire.
Think about it…
What if you did things differently to most people?
Imagine if you followed these 4 rules and started heading down the path of financial security.
Of course you’ll have to do much more than that, and that’s where those good money habits I mentioned a moment ago come in.
Let’s look at them.
- Continuing your ongoing money and finance education.
- Keeping a budget. Because for most people, when it comes to managing their money, failing to plan is the same as planning to fail.
- Tracking your income and expenses.
- Opening your bills when you get them.
- Paying your bills on time therefore avoiding late fees.
- Refusing to pay the minimum on your credit card bills each month. Did you know that making minimum payments each month will ensure you pay the maximum interest?
- Reviewing your credit card statements for errors and erroneous charges.
- Never buying anything on impulse. One of the best ways to help prevent this is to make a shopping list and then stick to it.Being careful not to overspend on gifts.
- Paying attention to mortgage interest rates — even after you buy your home or investment property. Currently there are some potential refinancing opportunities that could save you tens of thousands of dollars over the life of your loan.
- Spending less than you earn.
- Saving part of your income for investment like I mentioned above.
- Never assuming past performance guarantees future results.
- Reading all contracts before signing on the dotted line.
- Avoiding the lottery. There is a reason why the lottery is known as a tax for those who can’t do maths.
- Ignoring the temptation to keep up with the Joneses.
- Occasionally rewarding yourself by splurging. You have to enjoy the journey otherwise you won’t enjoy the destination.
- Treating your household like a business. By taking an active role in managing your finances — and looking at ways to maximize your income — you’ll ensure a brighter financial future for you and your family.
Now is the time to take action and set yourself for the opportunities that will present themselves as the market moves on
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