I might sound like a broken record by now talking about the importance of saving money. But this is a great habit to adopt for a wonderful financial future.
Even pre pandemic, I have written posts about how crucial it is to learn good financial habits to secure our future. But then, I had no idea how bad it could get on dire situations (like this!) if one is left without any savings. Mind you, I am not a financial expert but I have picked up things along the way to understand the value of money and how it can work for you if you played well. Because let’s face it, money is a necessity in life even if we like it or not. We need it to execute our plans for the future, enjoy our life at present and also ensure the safety and comfort of our loved ones once we are gone. So you see, we have to play the long game with money. And that requires knowledge, patience and willingness to experiment with available resources.
6 Financial Habits for Growth to Adopt Right Now
One of the most vital aspects of growing up is learning to manage our money. It is unfortunately, one of the least covered things in our school and upbringing. Some people spend the proper amount of time on this, but the vast majority never get around to it. Lack of knowledge of finance creates a crack in your money habits and it is a vicious cycle which is passed on from generation to generation. Today, I want to go over 6 ideas that you can incorporate in your life to build a solid financial foundation for you and your kids to enjoy for the years to come.
1. Respect your Money
This might sound weird but trust me when I say this attitude goes a long way in changing your perception around money. Respecting money means understanding its value. Handling it with care and treating it with respect. I am not saying you should make a shrine for money and worship all day long. But spend it carefully, invest attentively, use it wisely, you get the idea. On the other hand, misusing your hard earned money can leave you with shocking consequences. Bad money choices directly lead to less or no financial resources. So begin to keep track of your income and expenditures, act like a guard of your finances and create a financial plan for wise execution of money that is at your disposal.
2. Learn to Budget for the Long Term
Most young professionals budget for next month rather than next year, much less the next thirty years. Learning to budget for the long term is a vital skill that you must learn quickly to get your financial world in order. Consider the future from the very start and you will be ahead of the majority of young adults getting started. Forget the “rewards” when they make you overspend. Rewards cards are all the rage these days but they are a bit of a spending trap. If you spend money on a credit card simply to get a reward, you are kind of defeating the purpose. Instead, get the best rate you can get. That will give you more than enough money to get your own rewards. If you can do both, great!
3. Learn to Multi-earn
Multi-earning is exactly what it says it is. Man is naturally going to go out and earn as much as possible. The best situation is one where you have several different avenues of income. This might be a blog, a side job or even a hobby. Whatever the case, you should always have some ways of earning on hand that you are good at. It will help you be more diverse as well.
4. Make your Emergency Fund a Habit
Having an emergency fund is the single most important thing you can do financially. Put that money back every single paycheck like clockwork and never think you have enough. This will keep you insulated when the economy dives, you lose a job or some other emergency pops up. Make it tough to get to as well so that you don’t tap into it for every little thing.
5. Enroll in Retirement Plan (401k) through Work
It must be so obvious to some of you but trust me, there are a lot of people out there who need a ”gentle nudge” in this direction. I belonged to the second group once. So this, I speak from experience. I still remember the time when I finally realized the importance of contributing to my Employee Profit Sharing Plan (EPSP) 7 years into working with a company. Yeah! Although I started contributing immediately, I had to soon move jobs and had to leave my work retirement fund sooner than I started. It was a sad story but armed by the knowledge from this mistake, first thing I did at my new work place is to enroll in the RRSP or STRP (which is the Structured Retirement Plan) trying to make up for the lost time. The meager amount I contributed to my retirement fund at the first workplace was promptly moved to my main investment funds account eventually but to think I left rest of “the free money” on the table was disheartening. If your Employer provides one of these (work RRSP, EPSP, 401k) its time to look into it, I would say. Also maximize on the contribution limit. If the maximum you can contribute is 5% from your pay cheque, go for it, because your employer will match it up. And THAT is the free money I am talking about! This is part of that budgeting long term thing I mentioned above. Plan for your own retirement and if other funds are available, you will have added security.
6. Get a solid Accountant you can Trust
You can follow all the advice in the manual and mess up a tax return to ruin it overnight. Getting an accountant to take care of your taxes and paperwork is a cost that is worthwhile at all times. This is especially true if you ever get audited. There is nothing wrong with seeking expert advice even if you have to pay a little for the service. That is also a sort of investment to protect your assets in the long run.
RELATED: How to Live Well on Less in Pandemic
There is a truck load more of advice I can give you on finances, all tested and still in use by me. But I think these 6 financial habits mentioned above would give a firm start in your journey. As you go along practicing these money management ideas, you will see the difference it brings about in your life. You will start feeling a cautious optimism and a certain independence and confidence when handling money. It is completely normal because now, you have more control over your assets. And who doesn’t like that feeling?
Hopefully this helps you in some way. I look forward to watching you grow financially!