Healthy financial habits are key to achieve financial freedom. Any habit that involves money in it can be called financial habits. Spending, saving, investing etc. comes under financial habits, even your mindset. In order to achieve financial freedom, you need to have good financial habits. These can be as simple as not spending too much and as complex as keeping an eye on all the financial instruments coming in the market and finding innovative methods to grow wealth.
Having good financial habits will make your money management look effortless. You will feel like it is automatic, without conscious effort, signalling the healthy function of our personal financial system. The only short-term inconvenience could be the amount of effort to be put in order to inculcate those habits because after that things will be very smooth and you do not have to put much effort to seek financial freedom. Some of the habits useful to achieve financial freedom are :
- Minimalistic approach
In order to not exhaust all your money and feel broke by the end of the month, you need to have a minimalistic approach towards your expenses. Ask yourself if you need that object before actually buying it. We are a generation that does not think twice before buying which is really hampering our financial health and sometimes takes us to a point where there is a proper imbalance between our expenses and savings and we face negative savings. You will have to understand that is not how it should be and you really need to act on it by cutting off all your unnecessary expenses.
Look around your house, you may want to sell a few of those things you have done heavy investment in, but have probably never used. Categorize things into “Needed” and “Not needed” and then do the needful. You will have more money in hand, more space at your place and a vision on what to buy and what to let pass your view. Having a minimalistic approach really helps.
- Avoid having a lot of debt
Having a debt on you has never been considered a good thing in our culture simply because it used to give the impression that the person is not having enough money to get his things done which is not absolutely true these days. There are many people who take loans for reasons more than them not having money.
Even though there is a tax benefit associated with some debt like home loans, etc. It is still better to avoid having a lot of debt as it reduces your monthly disposable income and thus your savings and investments. Clearly, it puts a comma to your wealth creation plan. Avoiding debt is a safe habit especially if you are not an expert in money management.
If there is an ABC in Finance, then B stands for Budget as it is very basic. Budget is a type of plan where you write all your upcoming income and expenses or how you are going to allocate each rupee. Each rupee should be allocated appropriately and you should make sure that the budget is followed with little or no deviation in the figures.
This keeps a check on unnecessary spending too. You will know when to stop spending since you have allocations made to everything important in your budget.
The difference between Income and expenses are savings and one must save for various purposes such as emergency or investment. Saving enough can help you create your own wealth. Not saving makes you and your loved ones very vulnerable in case of emergencies.
The habit of saving and Investing go hand in hand. If you have saved money, you have to allocate it somewhere, in some financial asset and that is called investing as you are putting your money somewhere with a view for it to grow. The investments are supposed to be goal-oriented and thus, time-bound. One must invest keeping in mind all its short-term and long-term goals.
There are various financial assets such as Shares, debt funds, Gold, real estate and fixed deposits where one can invest and get good returns as regular income.
Habits are very impactful. Good habits can help you achieve anything and everything whereas bad habits can make you destroy your inheritance as well. Choose wisely. Work on your habits, make a difference. Achieve Financial Freedom.
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