With the right spending and savings habits, it is possible to achieve personal financial success regardless of your income level. Careful planning and self-control are essential, and a few tried-and-true habits:
1. Pay yourself first. Financial gurus across the board say that, no matter what your income level, your first priority should always be to save a portion of every paycheck. 10% of your income is the recommended minimum, but if putting away this portion will leave you short on bills, then determine what you can afford to put away and commit to it. Whether you save five, ten, or fifteen percent, or just $50 from every paycheck, make sure you do this on-time, without fail. Make this money work for you by investing it in a high-yield savings account or certificates of deposit.
2. Set financial goals. One of the most important aspects of achieving financial success is goal-setting. Without financial goals, it will be pointless to make decisions on savings and investments, and to use your money to take you where you want to go. When setting financial goals, think about what you want in the short term and long term. Sit down (with a spouse/partner if you have one) and think about where you want to be financially in the next year, five years, ten years, and so on. What are you saving for? Retirement, a family vacation, buying a home, starting a small business? Write these goals down and keep them with your budget so you can periodically evaluate your progress towards achieving them.
3. Make and keep a budget. Only those who know exactly where their money goes will achieve financial success. Live within your means and keep detailed records of your expenditures, from rent/mortgage payments to snacks in the checkout line. Keeping these kinds of records will show you what your spending habits are, so that you can plug any leaks and be more responsible with your money. Budgets can be kept in a checkbook, a spreadsheet on your computer, a ledger, or even with budgeting software such as Quicken, PearBudget, or GnuCash.
4. Plan for emergencies. Anything can happen at any time, whether it be a layoff, medical emergencies, auto accidents, or natural disasters, and it’s always better to be prepared than not. So you won’t be forced to depend on credit cards, loans, or government assistance, stash away money in an emergency fund separate from your savings account. It should be at least three months’ worth of income and go untouched unless it’s an absolute emergency. You can start an emergency fund by saving as little as $10 from every paycheck and increase as you’re able to.
5. Don’t buy on impulse. Impulse buying is the quickest way to blow your budget. If you aren’t able to control what you spend, you will remain in debt and not achieve financial success. For grocery and household shopping, make a list and stick to it. Don’t be tempted to grab extra or pick up something else because it’s on sale. If you really need it, you can go back for it. Don’t keep cash – bills, credit/debit cards, or checks – with you during the day so you aren’t tempted to spend on unnecessary items. Plan for every expenditure, even the little things. Don’t browse for the sake of it – buy what you need and leave the store.
You can achieve financial success with the right habits. There are no hard rules and your situation and abilities may change over time, but always keep these paradigms in mind to live with financial freedom.