There are five essential money habits that are really critical to your overall financial success. These money moves are the foundation for a successful financial life and that is the reason you should be using them in your everyday life. You might be surprised that these essential money habits are very simple concepts to implement: know where your money goes; spend less than you earn; have financial plans; be a smart spender; and, develop a savings habit.
Why do we need to know where our money goes?
Most people are surprised when they look back at their expenses for the previous month because they can’t believe how much money they spend without purpose. This is important because it is your roadmap to making impactful spending cuts that can change your financial outlook.
It seems obvious but why is it crucial to spend less than you earn?
Without this control in place most people end up building massive credit card debt and have little if any savings. One minor financial setback can often lead to disaster. If you spend less than you earn you will be able to build appropriate savings and have a cushion to overcome financial difficulties.
Should we have both a short term and long term financial plan?
Yes because both provide different support. Short term planning helps to make day to day decisions and solve any pressing financial matters. Long term plans provide direction on what needs to happen to achieve major goals. Planning increases your chances reaching any type of goal.
What is so powerful about utilizing smart spending habits?
Spending is often easier to control than increasing our income. If someone is struggling to spend less than they earn they can achieve this by being smarter when they do spend. This includes using coupons, buying used instead of new, looking for deals and discounts and waiting for items to go on sale rather than buying just because something is on sale.
Finally, why is building a savings habit so critical?
It is easy to let your spending creep up as you earn more. Being a disciplined saver is one of the best ways to slow down lifestyle spending inflation and protect your current and future financial well-being. Saving for emergencies, major purchases and retirement are three primary buckets that if started early really do pay a lifetime of dividends.