They say money can’t bring happiness. But, they do sure help achieve happiness to some extent because they allow you to buy what you need and want. Here are six smart financial habits that can help you achieve a healthy financial future.
Being a young adult isn’t easy, especially money-wise. You’re now just realizing the true value of money and all the things you need them for. Since, unfortunately, personal finance is not required, nor a popular subject, in high school and colleges, many young adults find themselves struggling financially due to a lack of financial literacy. In other words, when you are not taught how to handle your finances the smart way, you find yourself struggling paycheck to paycheck at some point in your life.
According to data from 2019, over 40% of Australians report experiencing some financial stress and hardship in the previous three months. And, it seems that young adults, 57% of people aged 18-29, felt an equal-all time high level of financial hardship.
Now, financial stress and hardship shouldn’t be normality in your life. And, this won’t be the case if you know how to manage your money the smart way. And, as a plus, if you adopt these six smart money-management habits now, you’ll also secure a healthy financial future for yourself.
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- Learn how to budget
This is the no. 1 rule of managing our money smartly. Knowing how to budget is an absolute must-do in order to be in full control of your finances.
Think about it: without a budget, you don’t know exactly what your income is and what you spend it on. Without a budget, you have a very high chance to find yourself in a scenario where you check your bank account and not be sure of where all your money went. This is exactly when you start experiencing financial stress, followed by financial hardship.
Budgeting is the best way to stay in control of your expenses. You know precisely how much you earn and how much you spend, and on what. A budget also helps you make sure that you don’t overspend.
There are several budgeting strategies you can use. For example, you can use a budgeting app that automates pretty much every payment you make and allows you to separate your expenses into different categories from living expenses to debt, rent, clothes, and shoes, etc. Another budgeting idea would be to use the 50-30-20 budgeting rule, where 50% of your income goes to essential expenses such as living costs and debt, 30% of your income goes to your wants, and 20% of your income to savings.
- Differentiate the wants from the needs
Are you aware of what you really need to spend money on and what you only want but not necessarily need? If not, you’d better start making the difference between the two.
Here’s the deal: if you see a big, red “SALE” sign at your favorite store and go in and buy a bunch of items just because they were “on sale,” you most likely don’t need anything from what you just bought. This is overspending, a mistake many people do and then experience financial stress.
So, a good money management strategy is to take your time to differentiate whether you need something or only want it. For example, your rent, living costs, and debt are examples of expenses you need to make. The 14th pair of shoes or a blouse you’ll end up throwing in the back of your wardrobe and never wear is something you only want.
- Maintain a good credit score
During our lifetimes, we all get to the moment when we need to make a significant and important money decision such as purchasing a home, investing in a company, purchasing a car, or even starting our own family, a decision that can bring lots of unplanned expenses.
Yet, more often than not, many people need a little financial help to pay for these decisions. This is when your credit score comes into the scene. And, it should shine.
The credit score is one of the most important factors that lenders consider before lending you money. Whether or not you are a risky borrower is determined by lenders by looking at your credit score. More precisely, the credit score represents your creditworthiness. So, the higher the score, the better you look to potential lenders.
To maintain a good credit score, you need to:
- Pay your bills on time
- Keep your credit card balances low
- Pay your debt
By caring for your credit score in the present moment, you improve your chances of getting a loan in the future.
- Get insured
Insurance is another crucial step to take when improving your money management habits.
Think of insurance policies as umbrellas that protect you from those rainy days. In reality, they are these financial safety nets that protect you and your loved ones financially in case an unplanned bad event happens, such as an injury, disability, death, loss of income, property damage, or car accident.
Know that statistically, we’re all one serious illness or similar bad event away from bankruptcy. So, to make sure that no unplanned event will mess with your financial stability in the future, look for the best insurance policies that suit your needs and invest in them.
- Invest to increase your income
Once you get back on track financially and you’re able to cover all your monthly expenses without struggling paycheck to paycheck, you can finally look for opportunities to increase your income.
Investment opportunities can come in all sorts of manners, from investing in super funds Australia opportunities to investing in yourself. More precisely, you can either invest in various investments, like bonds, equity income, or shares that bring you impressive returns, or invest in yourself and secure a better-paying job.
The more and smarter you invest today, the higher incomes you’ll have in the future.
- Save for later
It’s no way we could not have included saving on our list of smart financial habits. Saving is a must-do if you want to make sure that no expense catches you off-guard with an empty bank account.