With the right spending and savings habits, it is possible to
achieve personal financial success regardless of your income level.
Careful planning and self-control are essential, and a few
tried-and-true habits:
1. Pay yourself first.
Financial gurus across the board say that, no matter what your income
level, your first priority should always be to save a portion of every
paycheck. 10% of your income is the recommended minimum, but if putting
away this portion will leave you short on bills, then determine what you
can afford to put away and commit to it. Whether you save five, ten, or
fifteen percent, or just $50 from every paycheck, make sure you do this
on-time, without fail. Make this money work for you by investing it in a
high-yield savings account or certificates of deposit.
2. Set financial goals.
One of the most important aspects of achieving financial success is
goal-setting. Without financial goals, it will be pointless to make
decisions on savings and investments, and to use your money to take you
where you want to go. When setting financial goals, think about what you
want in the short term and long term. Sit down (with a spouse/partner
if you have one) and think about where you want to be financially in the
next year, five years, ten years, and so on. What are you saving for?
Retirement, a family vacation, buying a home, starting a small business?
Write these goals down and keep them with your budget so you can
periodically evaluate your progress towards achieving them.
3. Make and keep a budget.
Only those who know exactly where their money goes will achieve
financial success. Live within your means and keep detailed records of
your expenditures, from rent/mortgage payments to snacks in the checkout
line. Keeping these kinds of records will show you what your spending
habits are, so that you can plug any leaks and be more responsible with
your money. Budgets can be kept in a checkbook, a spreadsheet on your
computer, a ledger, or even with budgeting software such as Quicken,
PearBudget, or GnuCash.
4. Plan for emergencies.
Anything can happen at any time, whether it be a layoff, medical
emergencies, auto accidents, or natural disasters, and it's always
better to be prepared than not. So you won't be forced to depend on
credit cards, loans, or government assistance, stash away money in an
emergency fund separate from your savings account. It should be
at least three months' worth of income and go untouched unless it's an
absolute emergency. You can start an emergency fund by saving as little
as $10 from every paycheck and increase as you're able to.
5. Don't buy on impulse.
Impulse buying is the quickest way to blow your budget. If you aren't
able to control what you spend, you will remain in debt and not achieve
financial success. For grocery and household shopping, make a list and
stick to it. Don't be tempted to grab extra or pick up something else
because it's on sale. If you really need it, you can go back for it.
Don't keep cash - bills, credit/debit cards, or checks - with you during
the day so you aren't tempted to spend on unnecessary items. Plan for
every expenditure, even the little things. Don't browse for the sake of
it - buy what you need and leave the store.
You can achieve
financial success with the right habits. There are no hard rules and
your situation and abilities may change over time, but always keep these
paradigms in mind to live with financial freedom.
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