2023 is approaching and we all are making resolutions for the new year. It is always better to work on your habits rather than just make resolutions. Financial habits are no expectation. Managing money is more important than earning money. I have listed few financial habits which you can adopt in 2023.
1. Making a Budget and tracking it regularly
Budgeting sounds a boring task to most of us. But making a proper budget on a yearly as well as on monthly basis is a very important part of managing personal finance. It will help you to identify areas where you are spending your hard-earned money. Tracking the budget on regular basis is as important as making the budget. Nowadays many budgeting apps are available online. You can download any app as per your requirement. Record all expenses on daily basis and review it on monthly basis. Slowly it will become your habit. It will help you to identify unnecessary expenses, which can be avoided in the future. Remember: Used correctly, a budget does not restrict you, it improves you.
2. Changing the Equation of Saving
We Indians are good at saving money but we save whatever is left after spending. As said by Warren Buffet “Don't save what is left after spending but spend what is left after savings”. This will help you to avoid spending money on unnecessary things. Remember “Money Saved is money earned”.
3. Making a proper financial plan
Having a clear idea of where you are and where you want to go financially is an important first step. Make a list of your goals, decide the time horizon and calculate the amount required for each goal. Financial planning will give you right direction to become financially independent.
4. Understanding the difference between assets and liabilities
It is important to understand the difference between assets and liabilities. Assets put money in your pocket and liabilities take money out of your pocket. For e.g., a car is not an asset but a liability as its value will go down over a period of time. On the other hand, buying shares of a good company is an asset as its value will go up in the future and you can also earn dividend income (Please consult your financial advisor before making an investment). Always remember poor people invest in liabilities whereas rich people invest in assets.
5. Paying Debts on time
Market is being flooded with multiple credit card offers to provide various benefits like cash back, free add-on cards for family members and waiver of fees etc. It is always good to have a credit card to enjoy various benefits and discounts but in many cases, people forget to pay their card dues on time. If you fail to pay your credit card bill on time, then you will have to incur various additional expenses like the late payment fee, interest etc. Regular defaults in payment may also downgrade credit limit and lower credit score.
6. Taking the help of an expert
What will you do if you have fewer or chest pain? Will you go to the doctor or simply search for some medicine after doing some research on google? I am sure you will go to the doctor because you don't want to take any risk. Then why don't you take the help of a financial advisor in managing your money? Your financial health is equally important. Don't take advice from friends, relatives or people who are not experts in financial management. Consulting a financial advisor will not only save your time but also help you to avoid financial mistakes.
7. Involving family in financial planning
In our society, most of the financial decisions are taken by bread earners or head of the family. It is extremely important to involve your spouse while taking any financial decision or making a financial plan. In this way, you can increase their financial awareness. Make a list of all your investment, savings and insurance policies etc. and share it with your spouse. It takes commitment and effort from all the family members to ensure that the financial goals of the family are fulfilled.
8. Investing with proper understanding
Do you remember amount of research you did before buying your latest smartphone? You must have checked every detail like camera quality, processor, display, operating system, cost etc. Why don't you take similar efforts before making an investment? It is very important to do some basic research before investing. In long term it can help you to avoid costly financial mistakes. With a basic understanding for better future, it is always advisable to take the help of a subject matter expert.
9. Controlling your emotions while making investment
Emotions play vital role in investment journey. You won't be able to succeed in the financial market or investing without controlling your emotions while making a financial decision. Investing based on emotions like greed or fear are the main reason why so many people are buying at market tops and selling at market bottoms. It's easier said than done to get your emotions in check. It takes years of practice to take control of your emotions while taking financial decisions.
10. Increasing Financial Awareness
As said by Benjamin Franklin “An investment in knowledge pays the best interest”. It is very important to have basic understanding of finance. Try to read some books on personal finance or money management. It will help you to avoid financial mistakes while taking any decision relating to saving, investing or other financial matters.
The author can also be reached at uzmaqazi743@gmail.com
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