You may be in your twenties and still establishing your financial practices, fresh from a divorce or bankruptcy, or just looking for a fresh start, but either way there are some important financial habits and strategies to adopt that will set you up for wealth and peace of mind as you move into the next stage of your life.
You know, success with money really comes down to some fundamental beliefs and strategies. The general rules and approaches that you consistently take each week and each month set you up to come out on top, even when there are unexpected expenses.
Provided below are some key steps for a financial approach that will carry you through all life stages and events.
Spend less than you earn. It’s so seductive to think that you can overspend and rely on credit, that tomorrow it “will all work out.” Actually, it almost never does. Even if you end up making a lot more money down the road, once overspending becomes a habit, you’ll almost certainly spend the increase too. It’s equally seductive to convince yourself that being in debt, for now, is okay. It’s not! When polled, the majority of the 500 richest people in the world chose having no debt and saving money as by far the #1 step to financial success. Personally, I have come to believe that it’s critical that you save no less than 15% of your income.
Have an emergency fund containing 4 to 6 months of income. Things will happen, and repeatedly having such a fund will prove invaluable to your peace of mind, and to your ability to stay on track financially. If you’re currently in debt, start with $1,000 before even paying down a penny of your debt and read more about prioritizing from: Save Money AND Eliminate Debt? Yes, If You Know How to Prioritize
Have a thought-out written plan. A study of a Harvard graduating class found that the 3% that had a written financial plan when they graduated went on to make more money than the other 97% combined. That’s 33 times more money than their fellow Harvard graduates. No message could possibly be clearer to me. Creating your own plan is not difficult. Here are some links to Money Smart resources to get you started: Financial Worksheets and Financial Calculators
Manage your money yourself. Do not buy into the myth that personal money management is so complicated and that you need help with your financial decisions, especially when that help has a vested financial interest. Most financial “experts” are great salespersons and, usually, awful money managers. If you have any doubts, check out Assessing the Costs and Benefits of Brokers in the Mutual Fund Industry by Daniel Bergstresser of the Harvard Business School. As to how to manage your money yourself, that’s what my Money Smart project is all about–teaching you how. It’s not difficult. You can start reading about it here: www.moneysmartonline.com. Also, listen to the podcasted shows that interest you and consider buying the book at some point. You’ll find it to be a great resource and reference manual for most of your financial decisions, going forward.
Always believe in yourself. Studies have repeatedly shown that having a positive attitude wins, and this has been my experience as well. So never sell yourself short. With a positive attitude there’s almost nothing you can’t accomplish.
Understand that money isn’t everything. Yes, it’s very important to have enough money to live a decent life. Beyond that, however, the evidence is overwhelming that money is more likely to take away from your happiness than add to it. Never trade health, relationships or liking what you do with your time for more money. It’s one of the worst trades you could ever make. Remember to stop and smell the roses, so to speak.
This approach will take you where you want to go financially, and by adopting these habits you will surely create a tremendous sense of security that just can’t be bought. So, if you’re looking for change or just to set your financial life on the right track, deemphasize spending and establish the habits and financial strategies that will create the kind of peace of mind that comes from true and lasting financial security.