There has been a growing increase in the level of expenditure of the average individual in the last decade. The reason behind this hike is partly due to the ease of access to credit facilities coupled with a shift in attitude from “I’ll save up to buy something” to “I’ll buy it on credit and have it now”. As good as this ease of access may sound, it has also made many people run into debt. Purchases are made on credit are sometimes beyond their ability to repay the monthly amounts.
The need for financial stability is on the increase now more than ever before but, for some, handling finances can be a tricky task. That’s is why building the right kind of money habits is vital because it’s the bridge that will make your dreams of financial stability a reality.
To build financial stability, you need to create a collection of little daily habits. At first, these small habits may seem like baby steps, but financial stability is actually built through a pattern of behaviour sustained over time. Let’s take a look at 8 money habits that most people neglect but which can help you maintain stability in your finances.
1. Create a monthly budget
Creating a budget creation is a good money habit that most people are aware of. Unfortunately, very few out of this number go on to implement it. A budget is a plan for how you’ll spend your income and when you create this plan ahead of time, you’ll be able to check whether you have enough money to cover your monthly expenses, check where you’re wasting money. With a budget, you’ll also be able to make decisions to prioritise things like pensions, investments and savings which are essential for long-term financial stability.
If budgeting is new to you, then take a look at the 50 30 20 Rule – it’s a really uncomplicated budgeting model and is a great way to get started with money management.
2. Pay yourself first
Just as budgeting helps you not to overspend, paying yourself first helps you to grow your savings. So whenever you get paid the first thing you should do is save a fraction – in other words, pay yourself first before any of your bills. Many people make the mistake of saving what is left after spending, but that doesn’t prioritise your savings plan – save first, then spend whatever is left. Again make sure you do a budget to check what you can reasonably save, you don’t want to find yourself unable to pay your bills
3. Don’t spend all your bonus’
Bonus’ are a form of income that isn’t planned for or captured in your budget – it could come from your employer, a side hustle or even cash from family and friends. Always try to save part of this unplanned income and, as a rule of thumb, when you get a bonus, leave it untouched for at least 48 hours. This will help calm your excitement so that you can spend the money rationally.
4.Track your financial progress
A progress report boosts your morale and encourages you to do more when you see your success. Carve out some time in the month to check the progress you have made with your money goals. Go through your budget and double-check you’ve stayed on track, check how far you have gone in repaying those debts (if any) as well as your savings. Even if you’re partner manages your bank account, still make time to go through your records. Seeing the progress you’ve made together will help you both to keep pushing until you reach the level of financial stability you want.
5. Automate your savings
Automated your savings is the trick to growing that pot of money. Putting it into a separate bank account stops you from spending money that you intended for your savings account and by automating the transfer you’ll stay consistent without even having to worry about it. You’ll also get a buzz every time you look at the balance in your savings account which is so motivating.
Take a look at Starling where you can set up ‘spaces‘ so you can put money aside in virtual piggy banks, automatically round up transactions to save the change.
6. Avoid impulse buying. Only buy things that give you the utmost value.
An impulse purchase is a buying decision made on the spot because of an individual’s emotional state. The latest trainers, phone or outfit. Before you get your credit card out to place the order, ask yourself “have I budgeted for this”? If it wasn’t captured in your plan for the month, then it is a buying based purely on impulse. And always keep your wits about you when you see offers and discounts from sellers aimed at luring you into buying the product.
7. Plan your purchases
If you like to make a quick run to the supermarket to buy bits and bobs here and there, you may end up spending more money over time because you haven’t planned your spending in advance. You may be able to take advantage of bulk offers and you’ll avoid impulse spending.
8. Never miss monthly credit card payments
Make sure you always keep on top of your credit card payments, whether it’s the minimum payment because you have some debt or paying it in full. Achieving financial stability includes maintaining a positive credit score. And if you do have credit card debt, try to come up with a debt repayment plan to clear this off so you can start to save those monthly payments instead of putting them towards debt.
Small habit switches can make a huge difference in your financial well-being. And As little as those habits may seem, they act as pillars that will help make you financially stable. Start practising them now!