If, as Jack Canfield says, ‘Your habits will determine your future’, it’s worth committing to a set of healthy financial habits to strengthen your financial position in 2023 and beyond. As we all know, there is no quick way to build wealth. Sustainable wealth is created through the consistent exercise of good practices over a long period of time. With this in mind, consider committing to these money habits next year:
- Spend less than you earn
“There are plenty of ways to get ahead. The first is so basic I’m almost embarrassed to say it: spend less than you earn.” (Paul Clitheroe)
Although this advice may sound trite and commonplace, the only way you can begin to build wealth is to ensure that your expenses are less than your income – although keep in mind that this is only the first (albeit important) step in wealth creation. The real purpose of spending less than you earn is to create room in your budget to invest which means that it’s important to be strategic in how you employ your surplus income. Leaving your surplus funds in a savings account will do little to enhance your wealth, so it’s important to develop an investment plan designed to grow your wealth in real terms over time.
- Pay yourself first
“Do not save what is left after spending; instead spend what is left after saving.” (Warren Buffett)
Paying yourself first means intentionally finding room in your budget to invest towards your future – and to set this above all other financial priorities. But, more than this, it’s about being strategic about designing an investment portfolio that is aligned with your lifestyle goals and finding a balance between living in the present and saving for your future. It’s easy to convince yourself that you have more pressing financial urgencies than investing towards your future – but, if you adopt this approach, it’s likely you will always manage to find an excuse to avoid saving. Commit to paying yourself first – even if it means starting with a relatively small monthly contribution.
- Be intentional about your purchases
“The ability to discipline yourself to delay gratification in the short term in order to enjoy greater rewards in the long term is the indispensable prerequisite for success.” (Brian Tracy)
Research is clear that one’s ability to delay gratification is a key determinant in one’s financial success, so commit to practising this skill. Remind yourself that every purchase you make today is effectively a withdrawal from your future financial security and will delay the point at which you reach financial freedom. In a world where you can have anything but not everything, use delayed gratification to ensure that what you choose to purchase is aligned with your goals, values and overall financial plan.
- Think long-term
“Rich people plan for three generations. Poor people plan for a Saturday night.” (Gloria Steinem)
Investors very often find it difficult to look past the immediate social, economic and political happenings of the moment and to focus on the end goal of long-term wealth creation. Insidious habits such as tracking daily market movements can play on our emotional biases and frustrate our decision-making. If you are investing for the long term, regular tracking of investment markets is futile – so set this habit aside. Being a successful investor means riding out volatility while waiting for the markets to recover. Hyper-focusing on short-term market movements only serves to drain emotional energy and blur your long-term focus.
- Track your expenditure
“A budget is more than just a series of numbers on a page; it is an embodiment of our values.” (Barack Obama)
Budgeting involves a lot more than merely keeping track of expenses. As you get into the habit of record-keeping, checking bank balances, double-checking your debit orders and querying fees, the process of budgeting eventually forms part of everyday life. Be ruthless with your budgeting. Query your bank charges, shop around for the best interest rates, interrogate your cell phone contract and read the fine print. It also helps to know your rights in terms of consumer protection especially if you have loans, retail debt, credit cards or other financial contracts.
- Educate yourself
“If you are not willing to learn, no one can help you. If you are determined to learn, no one can stop you.” (Zig Ziglar)
The financial services arena is vast, complex and difficult to navigate alone, and distilling the information can appear to be insurmountable. But financial ignorance is never ideal so commit now to ongoing financial education in 2023. Find a reputable blog, publication or website that provides independent, unbiased financial information applicable to your specific needs. Remember, most poor financial decisions are made as a result of ignorance rather than foolishness.
- Talk to your children about money
“Don’t educate your children to be rich. Educate them to be happy, so they know the value of things, not the price.” (Victor Hugo)
Our relationship with money is formed during childhood, so be intentional about having positive conversations with your children from an early age. In a highly materialistic world, it’s easy for our children to receive conflicting messages about money and to question their value systems. That said, actions speak louder than words, so be sure to model the financial value system you wish to instil in your children. Commit to having regular conversations with your children about important topics such as budgeting, the dangers of debt, the importance of investing, and how investment markets work.
- Manage your debt
“Every time you borrow money, you’re robbing your future self.” (Nathan W. Morris)
Commit to being strategic about how you manage your debt. While debt may be unavoidable, how you manage it on an ongoing basis to leverage your financial position, create better opportunities for yourself and enhance your credit score is essential. Burying your head in the sand and making minimum monthly repayments is not a debt management strategy. If necessary, work with your financial advisor to develop a workable and realistic debt management plan.
- Communicate with your spouse or partner about money
“Money is either the best or the worst area of communication in our marriages.” (Larry Burkett)
It goes without saying that couples who are on the same page when it comes to money have a greater chance of their relationship succeeding, but it all starts with effective communication. Lack of communication around the family’s finances can lead to hurt, resentment, jealousy and financial infidelity, so be purposeful about talking to your spouse about money. It’s never too late to start. If you’re struggling to navigate your finances as a couple, find an independent advisor that has experience in joint financial planning.
- Stick to your plan
“A goal without a plan is just a wish.” (Antoine de Saint-Exupéry)
Start 2023 with a financial plan in hand and commit to reviewing and updating it regularly. Finding motivation to save and invest for the future is much more difficult in the absence of an end goal. Create a written set of goals for your life and develop a realistic financial plan to help you achieve them. If you lose motivation or veer from the path, read through your goals to remind you of your ‘why’.
Have a super day.
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