Personal finance is the financial management which an individual or a family unit performs to budget, save, and spend monetary resources over time, taking into account various financial risks and future life events.
Let’s see the habits everyone should have when it comes to the personal finance:
(Please count down the number of habits you follow, there is an exercise in the end)
1. Tracking your income and expenses.
2. Being careful not to overspend on gifts.
3. Paying your bills online when possible.
4. Keeping the money in your wallet to a minimum.
5. Spending less than you earn every month.
6. Never buying anything on impulse. One of the best ways to help prevent this is to make a shopping list and then stick to it.
7. Saving part of your income for retirement. Try saving at least 10 percent from every paycheck; it’s never too late to start.
8. Having an exit strategy when investing. Without one, it is tough to recognize the right time to cut your losses — or take profits off the table.
(Either we are too scared or too greedy. Happens to me all the time when I trade in stock market. I felt it’s better to keep a cut off percentage to book profits/losses)
9. Never assuming past performance guarantees future results.
10. Reading all contracts before signing on the dotted line.
(As soon as you turn 18, take care whenever you sign anything. It may sound silly, but a signature can knock you down and put you under series of nightmares, I have seen such things)
11. Reviewing your credit card statements for errors and erroneous charges.
12. Keeping a budget. Because for most folks, when it comes to managing their money, failing to plan is the same as planning to fail.
13. Faithfully following your budget. It’s one thing to create a budget, but if you don’t have the discipline to put it into action, why bother?
14. Paying the expenses on time. By doing so you’ll avoid spending money on needless late fees.
15. Taking advantage of coupons and internet promotional codes as often as possible.
(I personally love internet for this, it takes 5-10 minutes, but you can save up to 15-20%)
16. Using your credit card to buy things only if you can pay it off in full at the end of each month.
17. Refusing to pay the minimum on your credit card bills each month.
(Here’s a credit card fact: making minimum payments each month will ensure you pay the maximum interest)
18. Leveraging “good debt” to purchase things that have the possibility of increasing in value, or providing a path to a higher income in the future.
19. Setting, and then regularly reviewing and updating your savings goals.
20. Never overpaying for insurance.
(For example, why pay the higher auto insurance premiums for low deductibles if you rarely make claims?)
21. Fully understanding stocks and other financial instruments before investing in them.
(Basic mistake we all do. “Why are you investing in that stock?” “My friend/boss has invested in it.” We all have been there, haven’t we?)
22. Negotiating whenever the opportunity presents itself.
23. Maintaining an emergency fund. Everyone should have between three and six months of living expenses in the bank.
24. Avoiding interest payments whenever possible.
25. Treating your household like a business. By taking an active role in managing your finances and looking at ways to maximize your income, you’ll ensure a brighter financial future for you and your family. Who knows, may be you’ll even stop biting your nails.
Here’s a small exercise
Calculate your score out of these 25 habits. And multiply the answer with 4 and comment down your answers. For example, if you follow 20 habits out of 25, 20*4=80 is your score.
Score between 0 to 40– Please improve your personal finance habits. It’s never too late to start.
Score between 40 to 60– Good going, it’s time to break through the basic level and be financially independent.
Score between 60-90– You’re doing an amazing job. You’re on a roll to achieve Financial freedom if you already have friend named “passive income”.
Score above 90– Drop me a mail. I am open to learn more things from you! 😉