Top 8 Good Money Habits that Financially Savvy Person Needs to Have
Following are the top 8 good money habits to have for your financial health in order to have a healthy financial life.
Create a Budget
Most of the people don’t like to think about or hear this word. This is because people find common excuses like,” it is very hard” or “it won’t work” etc. But a budget is the most essential tool if you wish to control your finances. A budget gives you a clear picture of your earnings, your expenses and your savings. It is advisable to carry a book to write down whatever you spend. You will be amazed to find out where your money is spent. Communication is a key for preparing the budget since it is a family budget. Be sure to involve everyone in your family which will let you know what has to be done and you will feel more accountable.
Have saving goals
After creating your monthly family budget, you must know how much money you can save each month. Generally, you must make every attempt to save minimum 10 percent of your income. This percentage of saving is applicable regardless of your income. It is advisable to aim to save a small amount and make that happen, instead of aiming to save a big amount which won’t happen. When you start saving according to your plan, stick to the plan. Don’t use your savings for routine expenses but use the savings for emergencies.
Keep an eye on Investments
It is not a good idea to just follow what others are doing or be afraid to invest your money in any particular thing. This way you will not be able to build your wealth. First of all understand what kind of investor you are – which is often called as your risk profile. This will help you in making the right investment decisions.
Don’t depend on only one particular kind of investment. It is a better idea to diversify the risks of investment by investing your money in various types of investments and assets.
Buy insurance to protect your family
Staying uninsured exposes your family to risk. It is necessary to buy life insurance. This helps your beneficiaries to have a decent amount of money when you pass away. If you are the only earning member of your family with dependents, then it is always advisable to have life insurance so that your dependents are able to make a living with the help of the money received from your life insurance when you die.
Most of the people don’t plan their retirement. The reason is either they are very busy with their life or they are very young and hence don’t feel the need to plan for their future. People who are late in planning their financial future are at risk of huge financial disaster which can ruin their life.
Work out the amount of money you will need for your retirement. Estimate your likely expenses in your old age. In fact, planning for retirement is a part of wealth creation which must be started when you leave your school or earlier in order to build a strong financial future.
Pay all your debts
In today’s modern world, it is easy to have access to debt. Many people are keeping credit card balances and are paying hefty rate of interest of about 18 percent or more. It is always beneficial to clear the debt as soon as possible which will help you to save money besides becoming debt free. The money saved on interest amount can be invested to create wealth gradually.
Credit Cards habits
Bring down your credit card limits. The credit card companies increases the credit card limit when you make consistent payment for a period of six months. Don’t use the increased limit of your credit cards. Call the credit card companies and ask them to lower down the limit. Don’t use the cards which you don’t require but keep the accounts open as they form a part of your decent credit history.
Stop the bad money habits
There are a number of bad money habits including staying uninsured, carrying credit card balance, spending more than your income and not making a will. This is a necessity and indication of developing good money habits. All the above mentioned top 8 good money habits to have are useful to make you debt free and live a peaceful and healthy financial life.
Track Your Spending
This is a must else you will never know which expenses are essential ones and which ones are really frivolous expenses. Sit down with the spending sheet at the end of the week or month and you will realize that you have spent on things which could have been easily avoided. And believe me every cent counts and add up.