Good Financial Habits To Start Early In Life
Your twenties are an important decade for you financially, and the choices you make can define the rest of your financial life. It’s important to understand and ‘take on’ that your financial literacy is your responsibility, and to empower yourself by learning how to manage your money. By laying a solid a foundation with good financial habits now, your financial future is likely to be robust.
Financial success should be thought of more as a marathon than a race – a strong strategy, applied steadily with hard work, diligence and intentional living will pay off with dividends later in your life.
The drama of adolescence is likely behind you, but you’ve not yet accumulated the responsibilities that will come later (and the restrictions that come with them). But this is no time for dreaming – you’ll need to think sharp and act smart, or you’ll sabotage yourself before you’re even off the starting block. Establish Good Financial Habits now and they will impact the decades to come. Your life is a blank canvas, full of potential – and we’d like to suggest some good financial habits that will maximize your ability to reach all your positive potential.
Financial Habit #1: Create a Budget
A budget is a really important financial habit to keep, and is essential for you to know what’s coming in and what’s going out. Make it realistic and live within your means, or you’ll set yourself up for debt and hardship later.
Financial Habit #2: Get Organised
Be your own financial planner by keeping a record of everything related to your finances.
This might include:
- Cash flow
- Assets and liabilities
- Estate planning
There are numerous online tools available which we recommend you make use of. By doing this you’ll always know where you stand financially, and in so doing you’ll know where you’re headed. It may seem tedious, but these good financial habits will prepare you for your future.
It’s never too early to prepare for your future.
Financial Habit #3: Pay Yourself First
You are likely to need a down payment on a house or a new car, and it’s best to start building a contribution towards this earlier rather than later. Most of us will need a loan at some stage, and it will be helpful to have something to put towards it. Before you spend any of your income, set aside a portion for this.
Financial Habit #4: Plan for retirement
Put aside money for your retirement from your very first pay check. We recommend you join our Fisher Funds KiwiSaver scheme, and take advantage of the kiwiSaver benefits. And set up a payment for those student loans, and keep chipping away until they’re done!
Financial Habit #5: Invest In Yourself
Get on the right track, and get in the habit of keeping yourself there. Read money-related finance books, follow blogs on personal finance, and generally educate yourself. You don’t have to become an expert, just inform yourself of the basics.
Financial Habit #6: Set Financial Goals
Set yourself financial goals that are specific, measureable, actionable, reasonable and timely (‘SMART’). And when you do this, don’t compare yourself to your friends, or compete for short term wins. Consider carefully what you think your goals should be. This involves an element of learning to be content with what you have, instead of ever yearning for more (which is generally what leads to overspending!).
Financial Habit #7: Invest in Quality
Invest in the best you can wherever it’s appropriate. For example when buying a car, it may well be cheaper to buy an old one and cross your fingers that it lasts, but chances are it’s going to need expensive repairs and parts. This can apply to home appliances too – while cheaper ones may have an enticing purchase price, they may also use more power, more water, and may be more likely to break. Examine whether an initial saving is in fact a false economy which will cost you more over the long run. It’s about finding the right balance for you.
Financial Habit #8: Learn To Cook
Not normally something you’d associate with good financial habits, the ability to cook can save you heaps of cash! Avoid the fast food trap, and enjoy the positive impact on your wallet, and on your health, can be huge. Get your hands on a cookbook from your local library, browse the internet (Pinterest can be good for this), or attend a community class. It’ll stand you in good stead for the rest of your life, and may even reveal a food passion you didn’t know you had!
Financial Habit #9: Do Your Homework
With Google at your fingertips, there’s no reason why you should pay more for anything than you have to. Make sure you’re paying the lowest possible price for your purchases by researching thoroughly. These small savings added up over the years will have a substantial impact on your bottom line.
Financial Habit #10: Pay Your Bills On Time
One of the best ways to build a good credit rating is to pay your bills on time. Timely payments are one of the most highly weighted factors, and just one late payment could hurt your credit health for years. Adopt habits to remind yourself – perhaps calendar reminders with your smart phone, or try paying all your bills on the first of every month. If you have multiple credit cards you might like to get a debt consolidation loan so you’re paying off just one low interest amount every month.
Financial Habit #11: Keep A Clean Credit Score
Possibly the most important of all these good financial habits, make sure your credit score and credit reports are healthy. Observe how your credit rating responds to different financial actions you take, and see first-hand how it’s affected when you apply for a loan or when you pay down your balance. A good credit score can save you thousands of dollars, and it’s not the sort of thing you want to learn about by trial and error. It’s far easier to kill it than to fix it, and you only have one chance to build it from scratch.
For more information on establishing food financial habits to manage your money and your debt, give us a call at NZCU South – we’re here to help.