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By Jennifer Thompson

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August 10, 2021

Most of us were never taught good financial habits. But we all long for financial freedom. It’s really not that hard to achieve! And it is not some get rich quick scheme. Here are ten habits to achieve financial independence!

1. Know where you are at & know where it’s going

In order to know where you are heading you actually need to know where you are at this point in time. Get a clear picture of where you are right now in terms of how much you own in assets and how much you owe in liabilities. This is your net worth!

Do you know all your sources of income and where it’s all going? Looking at your credit card and bank statements complete a monthly cash flow statement.

Do you spend more than you earn? Keep good records of your expenses, savings, and investments. I can’t tell you how often I’ve heard of people still being charged a monthly fee for a gym membership that they canceled years ago!! The gym never stopped automatically debiting their accounts.

Check bank and credit card statements to ensure that there are no mistakes or evidence of fraud. Knowing where your money is going is also a helpful way of stopping leakages.

Do you know your credit score? You may be able to get your credit report annually at no cost. It’s a good gauge of how you are able to manage debt.

Jennifer Thompson Dealing with Debt

2. Set a budget and stick to it

Jennifer Thompson Budgetting

There are two approaches to this. One is to decide on the kind of life you want and how much it will cost to maintain that lifestyle and then making enough money to pay for it.

The second idea is to look at how much you earn and live within your means! Budgeting, much like dieting does not work with everyone. I have seen it work very effectively with some people and not with others. But it is worth a try! Be realistic and stick to it.

3. Pay yourself first

Jennifer M Thompson

Most people spend all that’s in their bank account. To achieve your financial goals, pay yourself first. Have a portion of your income automatically transferred from your paycheck to your investment or savings account.

You don’t miss what you don’t see and in no time, you will get used to not seeing or using this money and therefore not spending it.

Investing a portion of your money allows you to benefit from the magic of compounding. To put it simply, compounding is earning interest on interest.

The longer you save, the more interest you earn!

4. Pay off credit card debt every month

Jennifer Thompson Dealing with Debt

 

The power of compounding works both ways — for accumulating wealth as well as growing debt! If you are not in the habit of paying off your revolving credit facilities, the high interest on it ensures you end up paying two or three times what you originally owed.

5. Evaluate your success regularly

Have a friend with healthy financial habits become an accountability partner. Even better yet work with a financial advisor to keep you on track.

6. Cut down on compulsive shopping

Jennifer Thompson Compelling 365

Do you spend on things you need or on things you want? Do you have a clear idea of what that difference is? Are you an emotional spender, shopping when you are depressed or lonely? Before spending, ask yourself, “Does this get me closer to the life I want?”

7. Practise being intentional with your money

Aside from living within your means do you question where your money goes? What are your ethical guidelines for the purchases you make? What are your financial goals for 3, 5, and 10 years from now? Do you have them written down? You are more likely to achieve your goals when you write them down.

8. Build an emergency fund

jennifer m thompson

 

Life happens even to the best of us. Everyone should have saved up enough money up to about 3 to 6 months’ income to deal with emergencies like car repairs, job loss, or short-term illness. This will prevent you from using your credit card and getting into debt when an emergency arises.

This money should be in a savings account and not in the stock market! You don’t want to have to access the money for an emergency and see it has lost 50% of its value.

9. Work with an advisor you trust

Jennifer Thompson Compelling 365

It is very important to find an advisor with the proper accreditation who has your best interests at heart. While this is not a financial habit, it is proven to add value to your overall financial health.

Interview a few before settling on the one you can trust. A good advisor can create a portfolio generating a return higher than one you would have achieved doing things on your own. One of the qualities to look for is an advisor who listens and understands your needs.

10. Start now…

The most important financial habit is to decide, as soon as possible, that you want to start now.

As Tony Robbins says, “A real decision is measured by the fact that you’ve taken a new action. If there’s no action, you haven’t truly decided.”

So, decide and act now. Set up a savings account, get your credit report, see your advisor. Those are some actions you can take now.

Bringing It All Together

No matter where you at right now, adopting healthy financial habits can only increase your net worth and improve your relationship with money.

A great book to read to start your journey with money is “You Are a Badass at Making Money: Master the Mindset of Wealth” by Jen Sincero.

Additional Resources

This post contains affiliate links. I may receive a commission for products purchased through this post (at no extra cost to you).

Jennifer Thompson helps individuals and businesses achieve values-driven outcomes. To hire her, email her at jenniferthompson@compelling365.com

or sign up for her newsletter and her courses at www.compelling365.com

She has written numerous books on money: Women and Money: 7 Principles Every Woman Needs to Know to Be Financially Prepared in Any Economy and Growing Up With Money: Raising Financially Resilient Kids in an Age of Uncertainty.

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