Do Spending Habits Matter? Of course, it does...
A high paying job and a bunch of high-profile investments can land you in the elite earner’s club. However, it is often your money habits that make all the difference between a life of financial prosperity and one of constant financial stress.
It’s not surprising that taking regular ‘inventory’ of your spending habits is one thing that can get you on the road to better financial future. So what easy financial habits can help you cruise along the road to financial prosperity? Continue reading to find out more.
How to Spend Money – Financial Habits that Will Make YOU Manage Your Finances More Efficiently
Are You Concerned with Your Financial Health?
"It is often your money habits that make all the difference between a life of financial prosperity and one of constant financial stress..."
Many of our daily conversations are about habits – how exercise can improve your physical health, how to spend money and become wealthy and so on.
Just like bad eating habits can ruin your physical health, bad financial habits can get you into deep financial trouble even before you realize it.
Remember that ‘how to spend money wisely’ is all about taking control of your financial habits and making them work for you. Are you ready to get started?
Are You Good or Bad with Money?
If you’ve been making excuses about how to spend money wisely, science might come to your rescue.
Even though it sounds surprising, researchers have identified a gene that determines whether you have good financial habits or you are bad with money.
Well, this research has to do a lot with self-control – some people have the ability to resist temptation and spend money wisely.
The Author of “Born to Spend” report says that only 25% of people are born with the good variant of the financial gene.
These people are really good at self-control and are more immune to needless spending.
On the other hand, if you have the bad variant of the financial gene; you will most likely end up spending money on something you shouldn’t.
Financial Habits You Can Start Today
1. Create a Financial Plan
The Financial Planning Association survey reveals that almost 2/3rd of Australians do nothing to plan for their financial futures or they have ‘loose’ plans.
If you thought that financial or spending plans are only for people with lots of money, you’ve got to think again.
"Remember that having a sound financial plan can benefit people at all income levels."
Finance experts suggest that having a strong financial plan can help you cover savings and investment, plan for retirement, education, medical and other emergencies, major purchases and of course, insurance needs.
Another important thing to remember is that financial plans are not only for older people. That’s right. If you have a spending plan in your late 20’s and 30’s, you are less likely to make financial mistakes.
It also turns out that financial goals aren’t just for the wealthy anymore. To get started with a financial plan, you need to have a thorough understanding of your current financial situation. It is helpful to determine your current worth (include all your assets such as cash, saving accounts, personal property and investments like stocks and bonds) and your liabilities (the amount you owe).
Once you have evaluated your financial standing, you are ready to move to the second step, i.e. developing your financial goals.
Setting clear and specific goals will give you a good idea about how to spend money and at the same time, increase your financial worth. Financial experts often suggest having both short-term and long-term financial goals in your plan. The financial plan you create should identify alternative courses of action.
For example, you can identify new sources of generating income (new investments, changing your job or even investing your savings more aggressively to generate a higher rate of returns).
Also, you need to reevaluate your financial goals from time to time to ensure you are moving in the right direction to reach your financial goals.
2. Know Where Your Money Goes
One of the most important ‘how to spend money mindfully’ mantras is to know where your money goes. And the best ways to do this is by budgeting.
Another way to cut down on costs is to consider asking your employer what incentives they offer. You may be able to save on gym memberships or even get travel perks such as a company car or fuel contribution. It's always worth asking!
You can write down all your expenses to see how they add up over the course of a month.
If you look at people who are financially successful, you would see that most of them make very smart budgeting decisions all their life.
That’s right. The sooner you start budgeting, the more control you can have over your spending habits. Understanding when and how to spend money is essential when you want to put together your budget.
The first step, write down what you spend but don’t make it too complicated. It is also helpful to differentiate your spending into needs and wants. Spending money on healthcare, education, rent, and utilities are needs and there’s nothing much you can do about it. However, your list of wants is what you need to manage to move closer to your financial goals.
Yes, grabbing at discount deal that your favorite designer store needs to stop immediately. By cutting down your expenses a little each month, you can easily build your savings. You can also try using only debit cards or only cash to keep your monthly spending on track.
3. Set up Automatic Savings Transfer
Let’s face it – most of us forget to put money into savings account but automatic transfer is such a life saver. In fact is one of the best ways to spend money mindfully and help your finances grow.
How much money should you transfer? You can start with 1 to 2% of your total income and then gradually increase the percentage. Remember, once you watch your balance grow, you will be tempted to save even more money.
4. Put Your Credit Card Away
Nothing can damage your “how to spend money wisely” philosophy more than the habit of charging your credit card for everything from simple grocery purchases to your summer vacation plan.
If you want to break the credit habit, avoid credit card debt and save some money, it is recommended that you forget your card for good … like literally.
This video by Total Debt Relief explains how you can get out of credit card debt fast:
Try using a debit card which you can link to your budget to keep a careful record of how much money you spend.
5. Guard Your Wealth – Live Like a Secret Rich Person
If you want to make sure that the money you earn doesn’t disappear, you’ll have to take effective steps to protect it. Don’t fall for every gadget, spa voucher, or expensive designer wear that crosses your path. Instead, do more savings than spending.
Dr. Stanley, co-author of the book “The Millionaire Next Door” reveals that much of the wealth created by rich is the result of diligent savings, hard work and more importantly, living below your means. This, however, doesn’t mean you stop spending money. Remember, all you have to do is spend your money on things that matter the most.
The Bottom Line
You don’t need any special degrees to manage your finances in the best possible way. If you use these five financial habits for your life, you can be as prosperous as the rich guys and more importantly, start spending your money wisely.