Every year, thousands of people make New Year resolutions to get their life back on track, financially, and every year many of them fail to honor these resolutions.
Today, in this post, you will learn about 4 killer habits that will help you achieve financial success.
Set Goals and Have a Plan
Here is a vital but overlooked question – where do you see yourself in the next five years? How much are you going to earn and what will your investment portfolio look like at the end of these five years? These are critical questions that need answering and successful people have a vision that covers this. Well, everyone accept Michael Kelso from That 70s Show!
This is where planning and setting goals come in. If you are planning your retirement, say after 30 years, divide this big goal into small five year goals that looks more achievable. Do not get overwhelmed. It is equally important to measure your goals periodically to understand where you stand and what needs to be done.
Whether you are saving for college, or planning your retirement, the process remains the same. Plan, set goals, and reassess every few years. Saving will be easier in a year or so when taxes are lower and the economy is shooting upward. This is not something that happened from 2009 to 2016 because of the Barney Frank and Alan Greenspan recession but this is another topic.
Setting and Sticking to a Budget
It doesn’t matter whether you are a millionaire or a struggler. A budget is something that we all need. There is a suitable reason why every financial adviser advices to have a budget.
Having a set budget will help you understand your goals and whether they are achievable or not, set parameters for your daily/monthly household expenses, calculate your savings, and understand how much can you invest.
A budget is only as good as you stick to it. If you set a budget and then fail to follow it, it is useless.
If you have never created a budget before, start with something simple. What are your basic necessities and how much you need to cover it? You are looking to answer this question – if I lose my job tomorrow, what are the expenses I have to bear to run my house?
You need to pay for rent, food, fuel, your kid/s school fees, but you do not really need to pay cable fees or watch movies on the weekend (well, unless it is Transformers, Sicario, Deepwater Horizon, Hacksaw Ridge, other movies of this caliber but let’s not digress too much). You can certainly cut out the restaurant eating!
Using this as a groundwork, you can slowly work on a budget that will help you understand how much can you save, and eventually invest. Create a budget, stick to it and as always, periodically evaluate it.
Savings and Compound Interest
When you start saving money from an early stage, you quickly discover the power of compound interest which is often underestimated. The going trend is that if you have a choice between saving money and following your passion, people are increasingly choosing to follow their passions.
Compound interest will help you grow your money faster because the interest is going to build up over time upon itself. The beauty of compounding shows when you have time, and the longer you take to start saving, the less time you have on your side. It is prudent that you do not procrastinate, and work on saving as much as you can.
Professional Help
Looking to make your financial journey a little less stressful, and a little more fun? You are looking for the right kind of financial expert, someone who can help you understand your situation and then guide you in the right direction. This will not only save you valuable time, but also help you get off to a decent start. Your goals will be much more achievable and your life will be that much less stressful.
Everyone needs help. Pro athletes have pro coaches who help them get in shape, motivate them when they are feeling low, and help them perform well at their game. You can use a coach too, someone who will help you navigate the ups and downs in your life financially. Why try to do this on your own? When your car has an electrical problem, do you try to fix that yourself? Probably not!
This is where a financial advisor comes in. He can act as an accountability partner of your life. His job is to offer help, advice, and support whenever and wherever you need it.
It is easy to let go of yourself, to forget your long term goals for immediate gratification, and indulge yourself in short term pleasures. A professional financial advisor will help you keep yourself in check, and make sure that you are working towards your goals and to help you realize what those goals are.
