Making something a habit means you do it consistently and without much thought. A Repetitive action. This often carries huge benefits when compounded over time as it becomes ingrained and free up much of your thinking capacity. The proverbial 'just do it!' quote. Ofcourse, this applies to both good and bad BUT I'm referring to good habits here.
When it comes to finances, having good financial habits can set you apart from the masses just like how having high valuable skills can set you apart in the marketplace. Just like skills, habits also stack on top of each other. The more good habits you have, the less cluttered your mind becomes which gives you more time to do more. Too much thinking always mess up with our 'doing'. Ever heard of paralysis by analysis?
In this post, I share with you simple and easy to implement financial habits that you can incorporate into your life and reap the benefits in the medium to long term.
Pay Yourself First!
Many individuals (and businesses) have the habit of paying themselves last. Once the expenses and/or taxes have been deducted, they take home what's left of the balance. Sometimes the money is enough, most times it is not.So the first financial habit is paying yourself first! I know it's not that traditional and it seems easier said than done but with some discipline it can become possible. I've been doing it for almost an year now. Anytime I receive my income, a portion of it gets deducted and put into a seperate account.
In a nutshell, paying yourself first simply means having a fraction of your income that's being put away and doesn't have to be spent or consumed either through expenses or whatever it may be.
As you keep doing it every week or month, the amount accumulates and this money of yours can later be leveraged for investing which is one of the surest path to wealth. (Think of it like freedom money!)
The thing is if you don't allocate this money within your 'tight income', chances are it might never become available and that means you wouldn't be able to start investing at all. Like we'll cover in the next point, you have to start investing today, not tomorrow or sometime in the future.
Start Investing Today
Let's do a quick math to illustrate how important it is to start investing early.John started investing when he was 20 years old while Mike started investing when he was 40. Suppose they both invested $100 each month until the age of 60. This is what there balance will be like; John's balance with be $584K while Mike will be around $75K.
Clearly, the difference is huge! John started 2 decades earlier than Mike. The time you start investing is very important, the earlier you start the better for you. Did you know that Warren Buffett started investing when he was just 11? The man has been investing for over 6 decades and look what it got him, Top 20 most wealthy individuals on the planet! Like his buddy Bill Gates said, people underestimate what they can achieve in 10 years but overestimate what they can achieve in a year.
It's all about the long term thinking so start investing today. Lucky for us in the digital age, investing is now much easier and simplified than in Mr Buffett's time. With a few clicks of a button, you can purchase and own Google, Apple, Meta, Netflix or Amazon stocks.
A step further and you enter the crypto space where you're able to have better APRs with your investment. With Hive and applications like Polycub, not only will you be an investor but you'll also be part of the governance of the platform aka have a say in what's being done. How cool is that!
The possibilities are near endless and you have the freedom to explore. All you have to do is just to start now, don't be like Mike, be like John.
Track Your Progress
Making lasting improvements or staying on the right course towards achieving your financial goals will require you to track your financial progress. You can only improve what you keep track of, so you have to track and measure your progress.
Businesses have already gotten into this habit with their quarterly reports and high achievers also do something similar like that where they'll review their progress and make necessary adjustments based on the interpretation of the data.
This point is really important because there's really no straight path to anywhere and with the many distractions around it's quite easy to go off course and lose your way. This point helps prevent that from happening.
You can do it every month or quarter or bi yearly. Which one that favors you.
In Conclusion
Having good financial habits will immensely help in giving you an edge on your financial journey. Paying yourself first will help in getting the bag, investing today will help in securing the bag while tracking your progress will make sure that you don't lose the bag.
What stage of the financial journey are you in? What habits have you learned so far?
Thanks for reading!
Profile: Young Kedar
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