07 Feb, 2024

6 Money habits you should ditch to achieve financial wellbeing

We humans are creatures of habit. We have developed different habits of eating, sleeping and spending according to our calibre and the places we live in. Habits also dictate our financial health as people with impulsive spending habits might have a tendency to live poorer lives than the ones with better spending habits.

Here are some habits that you must not follow at any cost in order to achieve that financial freedom you so gravely desire:

1.Paying Yourself last

If you have read the book "Rich Dad Poor Dad”, you must have an idea on how people spend their paycheck. The author explains it in two ways, Poor People Habits and Rich People Habits. He explains that whenever the paycheck arrives, one set of people who have the poor habits tend to pay their bills first line rent, utilities, children fees, social expenses and so on and they tend to save what’s left afterwards, if there is any left to save at all. The other set who have Rich People Habits tend to save/invest at least 10% of their income. They do this by considering savings as a part of their expenses therefore, make deposits into their savings account as their monthly expenses.This forward thinking mentality starts to build wealth from ground up and empowers you to face any contingencies later in life. 

2. Loading yourself with bad debt

Debt these days has overwhelmed people and seems like they are taking debt to buy the smallest of things to make themselves comfortable. In order to put yourself on the path to financial success, avoid using debt to fund your lifestyle. Always have a repayment strategy in place when taking on debts like a car loan or a personal loan. Always ensure that you take debt considering your repayment capacity and not more than that which may affect your financial health in the future.

3. Not having emergency funds

The peace of mind that comes from having a buffer fund for 3-6 months of expenses is something that most people with fixed salaried income are not able to surround themselves with these days. The mental peace of having a buffer can free up your mind to focus on more important tasks in life. The starting phase of creating a buffer in itself is saving 10% of your paycheck in the first place. You can park these funds in highest yielding accounts available. Once you have this buffer in place, then you can start looking for investing into other forms of money making activities. Research and try to locate accounts so that you get maximum returns in yours savings.

4. Unclear about your income & expenses

To know where you want to be in your financial success journey, it’s important to know where to start. As your income starts to rise, your expenses too start to rise. You might think this is a normal trend, but this is the recipe for financial disaster and you want to avoid this at all costs to start building wealth. You might want to include a budget tracker for this part. Create a routine of spending at least an hour with the budget tracker each month. Having a clear understanding of your income, your assets & your liabilities will probably help you build more wealth compared to the ones who only fantasize about money and have an unclear understanding of these things.

5. Having hobbies that are expensive 

In the digital age of the internet, companies and enterprises constantly encourage us to spend more money on products we might not actually need. Having a hobby that drains your finances and holds you from saving your income in the first place can lead to more debt accumulation. Once you receive your income/salary, always try to put some amount of it on recurring deposits provided by most banks these days for maximum return.

6. Not focusing on earning more 

To have more wealth, you either save more of your existing income or you earn more. You might not be able to build wealth entirely on saving your income as there’s a cap to how much you can save. Building more income streams is the ultimate way to build wealth in the long run. Once you increase your income, the saving percentage can also increase and the process gets streamlined further. 

Being mindful of these things and having a clear plan will set you up for achieving your financial goals. This year, let’s make a habit of paying ourselves first, saving at least 10% of our income and building more productive hobbies to aim for a successful financial life.