Do you do the right things to make your money work for you?
Are you financially free?
The reason I am asking you these questions is because most people are not truly in control of their monetary situation.
I want you to make a lot of money with whatever you desire to do in life. But if you don’t manage that money properly then you will not achieve the financial freedom you desire.
I was not always in control of my personal finances. If I made a lot of money I would buy a new car or some other toy that I didn’t really need. Do you do things like this?
I wasn’t achieving my goals mainly through poor money management. So many years ago, I decided that enough was enough and it was time for me to take control.
In this post I will share with you the three personal finance habits that I embraced which put me on track to achieving my freedom goals. These all make perfect sense and will transform your finances and lives if you adopt and embrace them.
One of the things that I learned from my assessment of my financial habits, is that those that have wealth earn interest, while those that don’t have to pay interest.
So please read this post in full and commit to making these three financial habit changes in your life.
Financial Habits Of The Wealthy
1. You need a Budget
Creating a budget was the most effective way I was able to manage my money and I strongly recommend that you create a personal budget too. When you have a budget you take control of your finances and use it where you want to.
Something that I strongly recommend that you do before you create a budget is to take a look at what you are spending your money on over the last 6 months or so. I actually went back over a year because I knew that I had a couple of annual subscriptions lurking in there, and I doubted if I really needed them.
You need to critically examine what you are spending your money on. I found that I was paying out for monthly memberships that I wasn’t using any more.
I also discovered that I was spending a great deal of money annually on things like coffee and eating out in general. Spending $2 – 3 on a coffee doesn’t sound much but over a year it adds up to a lot.
Sometimes it is difficult to let go of certain things. If you have a new car do you really need roadside assistance or extended warranties? Are you paying too much for your car insurance, home insurance, life insurance etc.
I am not suggesting that you stop spending money on important things but are there cheaper alternatives? This is a great time to get new quotes and see if you can save yourself money.
I started by assigning a category to all of my expenditure. It doesn’t take that long to create a budget and it is easy to start off with a simple spreadsheet.
There are a lot of personal budget apps out there like Mint or Personal Capital but you can just keep it simple to start with and focus all of your energy on sticking to your budget.
When you have a budget you can make decisions at the beginning of each month a lot easier. Before I had a budget I would just get everything that I wanted without giving it that much thought. Then be shocked at the end of the month to find that I had a lot less in my bank account than I expected.
It should not take you too long to master budgeting. The concept is pretty simple really – know what is coming in and control what is going out. Having a budget really helped me to change my financial situation for the better.
I am not going to pretend to you that it was easy to follow at first – old financial habits are hard to break.
But when you see the cold numbers in a spreadsheet or budgeting app on a daily, weekly and monthly basis it does help to focus your attention on eliminating unnecessary spending.
By setting a budget each month you can plan your expenditure properly and with time you will be in total control of your finances.
2. Get rid of that Debt!
Do you have credit cards with debt on them? What about loans for a car and other items? How much interest are you paying to service this debt every month? Think about what you could do with that money if you didn’t have to service this debt.
Now don’t get me wrong here – I believe that credit cards are useful and I still have one. But what I do now that I didn’t do before is to pay them off completely each month.
In fact about six years or so ago I switched to an American Express card, and this forces me to pay it off each month. You also have the added bonus of collecting reward points, which you can use to treat yourself at a later date. My points often pay for flights or upgrades or hotel bookings, so it is a win win all round.
At first, paying off credit cards every month was really painful but it made me examine closely what I was using the cards for. I would always find numerous things that I didn’t really need, so these were all cut out in future months, which saved me large amounts of cash, that I could put to better use.
If you have a lot of credit card debt then you need to take steps to reduce this as quickly as possible. It is likely that the interest you are paying on this debt is a lot higher than with a loan.
Take a look at your options here. Can you get a loan at a good rate to pay off your credit card debt and save yourself a lot of money in interest?
Your debt situation is going to be different to mine but what you need to do first is be aware of exactly what your debt position is. Then you need to look for strategies to eliminate your debt.
There are a lot of good ways to do this that are beyond the scope of this article but there is plenty of good information online.
Make it your mission to become debt free. It is very liberating and you will save so much money. You can use this money in a smart way to invest in your future.
The only debt I have now is the mortgages on my properties, which is good debt, because I am leveraging bank money to make money.
Building my financial habit of getting out of personal monthly debt was one of the best things I ever did. I highly recommend you work on this too, it will change your life for the better.
3. Invest your Money
Once I had created a budget to control my expenditure and eliminated my debt I started to invest the extra money into a savings account. Sure you can do other things which provide a better return for additional risk but a savings account is a good place to start.
Even with a lowly savings account it is amazing how quickly the money builds up and seeing that interest accrue each month is very satisfying. Another advantage of having savings is that you can use them for those unexpected things that happen.
Maybe your car needs an expensive repair or you need to take care of some other large bill you were not expecting. You don’t want to get into a debt spiral again by using your credit cards so pay for this using some of your savings.
As for other forms of investment, there are numerous, stocks, bonds, crypto, options, art, watches, commodities, etc. Building businesses and real estate have always done good by me and are where I have made most of my money over the years.
Long term real estate investment should deliver higher returns than most other methods. You don’t need a lot of money to get started, so don’t let this put you off. REITs or crowdfunding are just two options.
Check out my how to start in real estate investing article for some great ideas.
I am a great believer in diversifying so it will not do you any harm to investigate other options, you could also talk to a financial advisor and see what they have to say.
My Final Thoughts on the Financial Habits of the Wealthy
Being out of control with your finances is one of the most debilitating and stressful things that can happen in your life. Not knowing from day to day where you stand causes so much anxiety it is beyond a joke.
But you have the power to change your monetary situation, by just adopting some of the financial habits of the wealthy. Get your budget sorted, start reducing your debt and then start saving and investing just $50 – $100 per month.
Before long, your bad financial habits will be broken and you financial future will be clearer. Once you start seeing the results, you will catch the investing bug and you will want to do more and more.
Give it a shot, you have nothing to lose. Use your money to earn interest instead of paying it.
I would love to hear from you now please.
Tell me about your experiences of working towards financial freedom and breaking bad financial habits. Have you got any tips you could share? Let me know please about your successes and challenges in the comments section below.
Thank you and have a great day.
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