Money is something anybody can have; however, wealth is consciously created. The difference between those who create sustainable wealth and those who are almost always broke, lies within the money habits they choose to employ. Unless your father is a billionaire, in which case you probably have a lot of chances to make money mistakes, here are just seven personal finance habits that you need to bear in mind to build wealth.
- Use a budget Budgeting is simply the process of drafting a plan to guide how you spend your money. A budget helps you attain your money goals, gives you control over your money, allows you to spend on the right things, and many more. It is a tool for those who intend to be wealthy.
- Spend less than you earn This is a basic accounting rule of wealth – Your expenses need to be less than your income for you to make profit. Hence, living above your means would only get you trapped. This is especially important for those who get fixed salaries monthly. Don’t get so carried away with the convenience of consistent income that you keep borrowing into income you haven’t received.
- Track every expense Ever been in a situation where all your money is gone and you cannot tell where it all went to? A lot of us have. This is the fastest way to lose control over your finance completely. Not only would you spend money on the wrong things, you would get cash trapped and not be able to build ultimate wealth.
- Have a good spread of investment and savings Not to sound like a broken record, ensure you save and invest. However, you have to also be careful with these. With saving, leaving money in a savings account might not be the best option for the longer term. This is because the interest rates that would accrue to your savings account would never be compared to the inflation rate. In other words, your money could be losing value if it is sitting idle. It is better to put your cash into risk-free investments like treasury bills. Also be very careful with entirely risky assets.
- Set aside money for contingencies and lifestyle expenses Contingencies would always arise and that in itself is constant enough for you to ensure you have money set aside. Not having a contingency fund could lead to financial difficulties as you would have to borrow against future income.
- Avoid Debt – Unless it’s yielding more money Avoid debt like a plague! While it is true that some of the richest people in the world thrive on debt, it is also true that they only use debt as a tool to make more money. If you are borrowing money to finance your expensive lifestyle, you would be stuck financially in no time.
- Curb impulsive spending Finally, impulse is very risky. Going into shopping malls and just picking items, or adding different things to your cart online is a fast way to get broke. You need to be able to keep track of your expenses and a great way to do it is to use Apps. Money Tracking Apps would show you exactly what your money for the past week or month was used for and you can make changes in the future accordingly.