Everybody out there would love to be financially secure. The scary part is the majority of the people in this country are living paycheck to paycheck and have no idea how to get out of the cycle of just having enough money to get by.
We are not taught much about money and finances when we are in school. Most of what I know is from making mistakes and learning how to fix them. I have come to love learning about personal finances and how to finally feel like I understand how to build wealth.
Most of us have terrible habits when it comes to money. Here are 10 financial habits that will make you rich if you are willing to put them into effect today.
1. Create a budget that makes sense to you
We have all heard that in order to save money we need to create a budget. This is unfortunately very true. You need to know where your money is going and you need to put a limit on how much you are spending.
The part that sometimes gets lost is that you need a budget plan that you can actually understand and one that works with your lifestyle.
For some people, a bare-bones budget will work just fine while others will need more flexibility.
The first step is to list every bill and expense you must pay and then budget in flexible expenses like food, clothing, entertainment, and so on.
The only way you will stick to your budget is to make it so that you still feel like you can live a fulfilling lifestyle.
2. Set up and emergency fund
An emergency fund is essential to keeping on budget and prevent you from going into debt.
Have you ever had a rather large expense come out of nowhere? Maybe your car needs to be fixed or an appliance went out in your house. These are circumstances we are not expecting that can really set us back if we are not prepared.
Just having an emergency fund of $1000 will keep you from stressing over unexpected expenses.
Having a cushion that you only use for true emergencies will really help with saving money and building wealth. If every time you have an unexpected expense pop up and you turn to credit cards to cover it, you are always going to paying off debt and will have
3. Plan ahead
Another important step to becoming rich is to plan ahead. If you know an expense is coming up and you have no plan to save for it, then you are going to be left with only a few options to cover it.
You will have to use savings which will put you behind on building wealth, you will have to use credit cards which will put you in debt, or you will have to try to manage to come up with the money from your recent paycheck throwing off your budget.
If you plan on taking a trip, set aside some money each week to fund your trip. If you know you are buying a new fridge soon, set money aside from each paycheck. That way you are slowly building the funds and won’t have to resort to one of the above scenarios.
There are many banks now that let you have multiple savings accounts that you can designate for whatever it is you are saving up for. I have an account just for insurance payments. I know every six months I have to pay a lump sum so I have $25 taken out of my check and deposited straight into that account. I then will only use those funds for my car insurance.
You can do the same thing for trips or big purchases.
4. Eat at home more often
Cooking your own meals at home is a great way to reduce expenses and increase wealth.
Eating at a restaurant can be pricey, especially if you do it several times a week. There are people I know that eat almost every meal outside their home.
Preparing your own meals at home will save you so much money. You can prepare the same dishes for less than a quarter of the price of a restaurant meal.
Eating at home has additional wealth benefits you won’t see right away but in the long term. If you are eating at home, you have control of the ingredients in your food. You can use much healthier ingredients that will promote a healthier you. This will save you tons of money in unneeded medical bills in the future.
5. Practice minimalism
Living with fewer possessions is incredibly freeing.
When I moved across the country last year, I did a major purge of my possessions. I was working at a retail store before my move and had amassed an insane amount of clothes. Instead of making me feel fulfilled and happy, all those possession were causing me stress and were like a weight on my shoulders.
I packed up two totes of clothes for both winter and summer weather and the rest was donated. I still had a lot of clothes with the tags on them. I ended up donating 9 bags of clothes. I kept the clothes that were practical to my new lifestyle and ones that actually brought me joy when I wore them.
Since then, I have bought only a few new pieces of clothing and I don’t really have a desire to buy any more. I don’t feel the need to shop at all. I feel so much happier without all the possessions surrounding me.
This lifestyle has saved me tons of money.
If you are ready to start living a more minimal lifestyle, start small. Go through your wardrobe and keep only what you need and what you love. Once you have fewer possessions around you, the feeling of lightness will stop you from meaningless spending.
6. Live below your means
Living below your means is the only real way to build wealth. If you always spend everything you earn or spend beyond your paycheck, you are never going to save money.
Living below your means doesn’t mean
It means not buying a $500 designer handbag or splurging on dinner every night. It means living more frugally. A $50 handbag will hold your belongings just as well as one 10 times as much.
The things aren’t going to make you any happier. Going to bed every night knowing you are working your way to financial freedom will.
The easiest way to live below your means is to pretend you are making less. If you make $1500 a week, direct deposit $500 straight from your paycheck into a savings account you don’t have immediate access to. If it never makes it into your checking account, it won’t be tempting to use that money.
7. Don’t put off saving for retirement
The sooner you start saving for retirement, the better.
The younger you start, the more growth potential your money has. The difference of just starting 10 years earlier can have as much as one million dollars worth of difference in your retirement savings.
Retirement might look far away depending on what stage of life you are in now. It might feel better to spend that 10% of your paycheck now, but 65 isn’t that far off.
If you want to be able to enjoy your golden years and not have to worry about not being able to cover expenses, now is the time to start saving.
8. Leave your credit cards at home
Having a credit card to build credit and for a little help when you need it is great.
Using it to go shopping for nonessentials is a bad idea though. Credit card debt is easy to rack up. When you are using your credit cards, it almost feels like magic money. You don’t have to use the real stuff sitting in your bank account.
It’s when the bill comes that you have to face having to fork over your hard earned money for things you feel like you already bought.
If you are always using your credit cards and never paying them off, you are not going to be building wealth. It will be a cycle you will be stuck on for the rest of your life. You are going to be paying interest on that purchase for a long time.
Use cash when you go shopping. You will be more likely to question if you need an item when you are paying with real cash and when you run out that’s it. It’s a good way to stick to your budget if you can only use what cash is in your wallet.
9. Buy the cheaper car
A higher car payment each month is cutting into the money you could be saving.
What options do you have when it comes to vehicles. Can you buy a used car instead of financing a brand new car? Do you need a new car that is financed? If you can’t get away with buying a used car, can you get a smaller car instead of a more expensive SUV or truck?
All these questions are important when making a big purchase like a car. If you finance you are going to have these payments anywhere from 3 -6 years.
Don’t overextend your budget by splurging on an expensive car. Play it safe and get a modest car with a reasonable car payment.
10. Stop comparing yourself to others
One of the worst habits to have when building wealth is spending too much time comparing yourself to others. Do you worry that you don’t make as much as a friend or family member? Does it always look like they have money to spend when you don’t?
You really don’t know what is going on with them financially. They may be spending more than they can afford and living outside their means.
Don’t worry about trying to keep up with anyone else. You need to make sure your financial life is in order and not whether you have as nice of possessions as anyone else.
Once you are secure in your plan to build wealth, it won’t matter what everyone else has. You will have peace of mind that you are building a great future for yourself.
Keep learning and growing on your financial path to wealth. Create a budget you can live with and spend less than you make. Take the small steps above and change your habits so that you can build wealth and live richly.