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Everyone uses money differently, and no one explains how to use it properly. I was taught how to save and spend on necessary things when I was young. I was never taught about investing, financial goals, assets, retirement funds, etc. I thought saving was the only way to be “financially stable.”
I eventually changed my perspective on money as I got older. Money is a tool that we use daily. We spend, save, or invest it, but no one talks about how to use it to set us up for financial success.
Most people grow up ignorant about money because schools or parents don't teach them about it. This is a topic that they have to learn on their own by turning to the internet (this is how I started).
Money is crucial because we need to buy our basic needs. It's incredible to see how much money is used daily and how much debt people have. Many people are in debt because they don't know how to take control of their money.
We must learn to break these bad habits and find a system that works for us. Starting new habits doesn't happen overnight. You can change them by understanding and working on them.
If you are a person who wants to get rid of your bad habits and work towards financial success, then this post is for you.
1. Stop Shopping on Impulses
Most people are guilty of shopping on impulse because they are bored, and shopping is a significant weakness for most of us. Let's be honest here, the market does a great job of advertising and displaying beautiful products or services, and we buy everything we see, racking up more debt on our cards.
In order to reach your financial goals, you have to discipline yourself. If you keep purchasing impulsively, it starts to add up quickly. Your budget from $100/month can be up to $500/month if you keep spending. Before you buy something, I usually ask myself a few things before purchasing anything:
- Do I need it? Is it worth it?
- Is the price reasonable?
- How many times will I use or wear it?
- Is there room in my room/house?
- How much did I spend already?
Instead of shopping, replace it by making the products if you can or do an activity that doesn't require spending. Most of us love shopping during our free time, and online shopping makes it even easier to spend a fortune because we see so many things online.
If you want to stop this bad habit, you should create a budget where you can spend a certain amount on shopping. Better yet, you should learn to shop and save like a pro. The rest you should save or invest your money.
To become wealthy, you must learn how money works.
2. Pay Off Your Debts
Did you know that if you pay off your debt quickly and early, you can save much more money? Think about how much interest you'll pay if you don't pay in full monthly.
People borrow money every day. Whether you are taking out a loan or using a credit card, there is always an interest rate you have to pay.
Dealing with debt can be extremely stressful and challenging, and the more you delay your payments, the longer it takes to pay them off. As of 2021, the United States household debt was up to $14.96 trillion. Most household debts are mortgages, student loans, and credit card debt.
Some people don't like paying it off, which takes longer to pay off. Creating a plan to pay it off faster can be your first step to being debt-free. One of the financial goals people tend to list is to pay off their debt quickly.
You should prioritize what needs to be paid off first and spend less on unnecessary things you don't need. Do your student loans, mortgage, or medical expenses need to be paid off first?
You can feel less stressed by creating a budget each month and paying off your debt.
3. Invest your Money
Putting your money into a saving account and letting it sit there will not do you any good. You only get around .04% back by keeping it in your savings account. It's better if you put it in a high-yield savings account than a regular one.
If one of your financial goals is to be financially free, you need to start your investing journey.
When you think about why wealthy people stay rich all the time, it's because they invest in many things. They either start a side hustle or business or invest in real estate. They don't just let their money sit in their bank account and watch it grow. They invest their money so it can do the work for them.
Investing your money allows it to grow quicker than putting it in your savings account. Now, don't get me wrong about a savings account. It's great to have just in case something happens, but you shouldn't put all your money in there.
Your money will lose its value over time if you keep it in your savings account. There is always inflation every year, so invest your money today!
If you want to retire early or have extra income, investing your money is the best way to do it. Check out Wealthfront if you are starting out and want to learn to invest. You'll get closer to your financial goals if you start asking for help and doing your research.
Some things you can start to invest in are stocks, real estate, or a business. Investing takes time to see results, but if you do it long-term, there'll be a great return.
4. Build an Emergency Fund
An emergency fund, also known as a contingency fund, is money you put aside in case something unpredictable happens in the future, like medical bills, loss of income, natural disaster, or home or car repairs.
This is critical for everyone because anything can happen. You should have this because it helps you stay out of debt. Without this, people use their credit cards or loans to pay these unexpected expenses. This will rack up more debt for you.
While paying off your debt is important, you should also save in case of an emergency. It is best to do both for your long-term goals. Doing both can reduce your stress level and keep you out of debt.
5. Live Below Your Means
When you live below your means, you can achieve financial freedom. Living below your means doesn't mean you should not spend on the things you love. You need to evaluate your lifestyle and take control of your money so that it doesn't take control of you.
Some people I see live frugally and only spend on things they need to live comfortably. Even if they are living frugally, they still live their lives to the fullest. They don't spend on unnecessary things like designer brand products or brand-new cars. They try not to be attached to material goods. As long as things work for them and they are happy, that is all they care about.
When you live below your means, you can achieve other financial goals you may have. It can be difficult to live a minimalistic life when you always see new products and services. You just want to buy buy buy!
You can save much money in the long run by evaluating your lifestyle and seeing what's important to you. Living below your means can be the first step to getting closer to your financial goals.
Think about what you value in life and what you want to spend on that makes your money worth it. Is it the experience or the materialistic things that you want? I try to balance between the two and buy what I find fits me while living a comfortable lifestyle.
6. Cut Expenses
Are you looking at your budget for the past six months and realizing you spent a lot of money without realizing it? You might be questioning what you even spent because there are way too many things to even keep track of.
The best way to be organized is by having a list of everything you pay monthly. You can make a chart or get an app to help you list out all the things you pay for every month. By listing things out, you know what expenses you need and what you don't need.
Most expenses that become very expensive are membership or monthly subscriptions such as Netflix, gym membership, subscription boxes, softwares, etc. Most of the time, we forget what subscriptions or memberships we have and pay for them without knowing. If you are not using them often, you should cancel them because it'll cost you.
You should know where your money is going. You work hard to earn that money so you should know what you are paying for.
You can try Truebill to help you keep track of your subscriptions.
When you have an app to help, it saves you all the headaches and stress, and you can cancel any subscription you don't use anymore. This will save you hundreds of dollars or more.
Let's Reach Your Financial Goals Together
I know staying on top of your expenses can be difficult, but if you are organized and track them, you can have that extra money to spend on other things. Remember, get your priorities straight so you can reach your financial goals quickly.
She started her blog, The Money Dreamer, when she realized the 9-5 job was not the lifestyle she wanted anymore. After designing for a while, she wanted a more meaningful life, which was freedom, so she decided to venture out. She took action so that she can live her dream life and decided to help people to live theirs by helping them how to save, budget, and invest.