As the year draws to a close, we should begin to look at how well we have fared in our personal finance management and make plans for the incoming year. Part of our review should include how to improve on the good financial management habits we already have and how to develop those we are lacking.
The number one habit we must possess is living within our means. This is the basis for other vital habits like budgeting and savings. Avoid the use of credit for lifestyle purposes and only use credit for income generating tangible assets. Business lunches and wardrobes, as important as they are to business success still fall under lifestyle expenses. Living within our means is non-negotiable for financial success.
Monthly budgeting of expenses and financial discipline to stick with the budget is another vital habit. Mobile Apps would help us create budgets peculiar to individual incomes and financial obligations. They would also help us with discipline by sending alerts and prompts to encourage us to stay within our budgets, but the responsibility is still that of the individual. How committed are you to achieving financial success, becoming a role model for others, and creating a financial legacy for your family and community? These factors should drive us to financial discipline.
Monthly savings is the next habit we must master. Savings are the source of investments required to build an investment portfolio. Savings accounts in themselves give notoriously low returns on investment and therefore are not recommended as investment vehicles. However, the accounts are useful for separating the cash we want to use for an investment until we have attained the amount required for the investment. This separation enables us to manage our funds without mixing lifestyle funds with investment funds.
Proactiveness in managing our finances is also a key habit. Plan how to spend an expected income even before it comes. That means we not only budget our monthly salary, but also bonuses, gifts, investment income etc. Proactiveness also involves planning your savings and investments by establishing standing orders with your bank. Set up standing orders on how much to deduct from your monthly salary. Set up standing orders on when to sweep your savings balance into the investment account. Proactiveness also suggests that you set up standing orders even for bills payments. Bank mobile apps already have this feature which we can adopt for recurring bills. Prompt payment of bills helps us to maintain a good credit score, which is vital for accessing business loans.
Financial literacy is key to financial success. Therefore, develop the habit of reading financial news and literature and keeping up to date with events that could impact your financial well-being. Being in the know will help you respond proactively and take quick decisions and actions that could prevent financial losses. Spend time to Google concepts you are not familiar with, so you can understand financial information adequately. With Google available in our palms, at the touch of a button, no one has an excuse for being uniformed about vital financial events and updates.
Proper debt management is another habit we must develop. Comply with all the provisions of your debts and ensure you never have to pay any default fees and fines. When using credit cards, never miss a payment. Instead, try paying off the whole balance every month. If this is not possible, make sure you pay more than the minimum payment required. Remember that credit cards are the number one bad example for compound interest. Interest accrues on outstanding balances including outstanding interest. Use credit cards only as a digital wallet, for convenience, and try paying off the whole outstanding balance every month.
Negotiation skills are vital for getting bargain prices and more value for money. Develop the habit of not accepting the first price you are offered. You will be surprised that everything is open for negotiation. Ask for discounts. Ask for bonus gifts. Ask for softer payment terms. Ask for free delivery. Push your luck. Nothing ventured, nothing gained. Always be on the lookout for how to get more value for your money.
As a hardworking person, you must also reward yourself periodically. You deserve a break, you deserve to be spoilt, but all within your means and within your budget. Therefore, plan ahead for these rewards and schedule them to coincide with bonuses or investment incomes, just ensure you avoid spending spontaneously when rewarding yourself.
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