If you’re feeling the pinch and wondering why you’re spending a lot more than you’re used to, take solace: you are not alone.
The recent pandemic and geo-political instability have caused inflation and resultant price hikes of essential goods and services. As basic needs become more expensive to satisfy, it’s the perfect time to take a closer look at personal finances and learn some helpful money habits.
1. Create and Maintain a Budget
Budgeting should be the first good habit you develop. The most productive budgets ensure that you live within your means: ie. you don’t spend more than you earn or rely too much on credit. A solid budget can also help you identify areas where you may be able to reduce spending.
You can start by creating an overall picture of your finances since this will be a significant determining factor in how much you can spend per month.
2. Identify and Reduce Your Debt
To keep from living beyond your means, you should aim to pay off bad debts as soon as possible. You will also be able to improve your FICO score by lowering your debts on things like credit cards; these debts account for 30% of your score.
Paying down debt means you’ll be able to save money for emergencies, have more cash on hand, and invest more money to grow your wealth.
3. Stop Wasting Money
This habit is probably the most difficult to acquire as ceasing unnecessary purchasing can be challenging.
One way to start is to differentiate between wants and needs. And try not to bend the rules: it may be funny to say that you need that new cellphone upgrade, but in reality, you don’t.
Once you have identified your needs versus your wants, eliminate the wants from your budget. This can help cut down on unnecessary purchases. Of course, there may be times when you want to splurge. Consider making a game of it. Set one personal goal for yourself each month. If you achieve it, reward yourself with one item from your “wants” list that falls within a certain price range (you don’t want to completely blow up your budget). If you can be disciplined, you’ll likely make a habit of responsible spending in no time.
4. Earn Extra Income
While not possible for everyone, earning extra money beyond your primary source of income is a great way to boost your budget.
Consider adding a side hustle to your main income stream—preferably something you enjoy and that suits your skill set and aptitude. There are so many options for part-time jobs, so do some research, think about availability in your current schedule, and remember not to overextend yourself.
5. Invest Your Money Wisely
When times are tough, many people shy away from saving and investing—but this can hurt you in the long run. If you have a little money left over after meeting your budget, aim to contribute to a savings or investment account.
You may be saving for a rainy day, your child’s education, or retirement. No matter what your priorities are, nothing beats a consistent approach to saving and investing.
Remember that no matter how difficult things get, there is always a solution, and if you apply these financial habits, you’ll be able to handle anything that comes your way.