Good Personal Finance Habits Everyone Should Follow
When it comes to personal finance there are some good habits that you need to employ.
Live Within Your Means
There is no point in setting good financial goals until you learn how to live beneath your means. This habit is not strategic in any sense; it just means that you learn to live with what you have and bank the rest. Your financial situation will improve as your savings and investments grow.
This means that you do not buy the cheapest goods or the most expensive. You should look at buying the best value for money. It can be worth to pay a little extra for a product that you know will last rather then buying something that you know you will have to replace.
Keep in mind though that not all products are better just because they are more expensive.
If You Have to Borrow, then you Can’t Afford It
Credit is a great thing when you are making a big purchase like a car or a house. People don’t generally have that amount of money in cash to buy these things, so borrowing does make sense. Good financial habits though means that you should avoid schemes that stretch your paycheck.
Pay Your Bills Before they Due
Paying bills late is another way to stretch your paycheck. This will just give you a false sense of how much money you have and this will put you under strain to cover the difference later.
Paying your bills ahead of time will give you more control over your finances so this will make it easier to have good financial habits.
Track Your Spending
If you do not have a budget then you will probably not have a clue where your money is going.
You then need to track your spending so that you can identify the areas of excess.
Shop Without Your Credit Cards
This will stop you from running up credit card balances, so you need to learn to shop with cash or your debit card. This will generally lead to you spending less as you don’t have the option of paying it off later.
Pay More than the Minimum on Your Credit Cards
If you are carrying a balance on your credit card then you need to start paying more than the minimum on time. This means that you will be able to pay off your credit card quicker.
This is important when you are shopping or out and about. You need to get in control of your impulse buying. When you start to shop online or buy something that doesn’t cost much, but do this a few times a week then the cost will really start to add up.
You can use the 72-hour rule, which is where you wait this amount of time for an item before you buy it. This will give you an idea of you really needs the item or if you just want it.
Refresh Your Emergency Fund
Everyone should have an emergency fund, but this should also be refreshed and replenished once you have taken the money.
Review your emergency fund every year and determine if it is able to cover your living expenses for 3 to 6 months. If it can’t then you need a plan to refresh it.
Cut Down on your Spending Allowance
Even those that budget can become slack when it comes to their personal spending and what they have allocated. This is the money that you use for entertainment and other casual spending.
Everyone needs a certain amount of free spending but you need to ensure that it doesn’t get out of control.
These are just some of the things that you can do, but there are plenty of more habits that you can employ.
If you would like to know more about personal finance, head to FinanceMan.