It all comes down to good financial habits. If you have poor spending and savings habits, the likelihood of you reaching your financial goals diminish. So what habits should you adopt in order to give yourself the best chance?
Think long term, as well as short term
When thinking about what you want, avoid the temptation of short term only goal setting. The immediate gratification of that shopping spree will soon fade, as your longer term goals seem further and further away. If you want to buy a car next year, aim towards that. If you want to buy a house in the next five years, aim towards that. Perhaps your goal is early retirement, put your finances towards that for the long term. Of course I’m not saying to ignore your short term spending, but life is all about balance. Balance your short term spending with your long term goals.
I am sure everyone is sick of me saying this at this stage, but save first spend later. The day you are paid, transfer your savings to your savings account. If you wait until the end of the month to save, you will find that your spending gets more liberal. By using this method, the savings will not be there for you to spend frivolously. You won’t spend as much on short term gratification and you will reach your long term goals faster.
We all know this person, buying bitcoin at a high, buying tesla stocks right before a controversial Elon Musk tweet, the list is endless. They get a sniff of whatever is “popular” at that moment in time, but they are gambling their money away. This person is likely to live on a rollercoaster of financial misery. They may as well be going to the races and putting it all on a random horse at the Curragh with no prior investigation or analysis. Sure, there are times you may be lucky on occasion, but in general it is bad practice. Sensible investing is done through diversification, time and careful management. Don’t gamble on the “in thing”, talk to a professional and make a plan that suits you. There is no “sure thing”.
Be mindful of debt
Debt is a necessary evil, how else would anyone afford to buy a home? It would be very difficult to save enough cash to buy property. These types of long term debt are relatively cheap, with lower interest rates. However, relying on debt to fund your lifestyle is a huge red flag. Credit cards and overdrafts are dangerous in terms of building up debt. You can quickly end up in trouble. Live within your means and cut the spending. I know it may sound harsh and be difficult in practice, but in the long term you will be far better off. Short term debt is expensive in terms of interest rates. Enjoying now can have a heavy cost for your future. Put in the hard work now, you will soon thank yourself.
Encouraging good financial habits from a young age can set you up for life. Remember, starting anything is always the hardest part. Once you make the good habits, you won’t have to think about it. You will soon be reaching your financial goals.
If you want help in reaching your financial goals, don’t hesitate to let us know.