They say old habits die hard, but when it comes to money, it's crucial to get rid of those practices that set you back financially.
Whenever you are making a financial decision or lifestyle choice, ask yourself how it is going to advance your financial goals.
Undertake self-evaluation and determine those poor money habits that you need to get rid of.
Some of the most common are outlined below.
1. Lack of a plan is the genesis of all the issues that go wrong in our lives. If you lack focus, you can easily lead a life minus a plan, hoping for miracles or one deal to sort your finances.
As a fresh start in the New Year, consider adopting a new habit of planning. For example, January is the school season and lots of people are scrambling to put together not only fees but school requirements. This pressure can be avoided with prior planning and saving for childcare and education.
The need to plan applies to all the expenses and investments you plan to undertake throughout the year. More so, you have 11 months to plan for the next festive season. To avoid the January blues that you may be currently experiencing, start planning and saving for festive season expenses today. That way, when it comes to the end of the year activities, you have resources at your disposal to decide whether to invest or finance that holiday you have been looking forward to.
2. For parents, one such habit to drop is not engaging in honest money conversation with your household, especially your children. Depending on the age group, provide information on money in line with their level of comprehension. You can choose to have a structured way of unveiling the conversation about money.
For example, you often get demands to purchase stuff for your children. However, instead of telling them that you do not have money and then moments later, you reach out for your wallet and make a transaction, provide an explanation.
To avoid this confusion, it is important that you explain to them that you do not have money to take care of their current need because you are currently spending according to a budget. This means that they have to forego this current item until you can afford it. This is the time when you can introduce to the children the concept of saving for an item that will be purchased later.
3. Another habit that sets us back financially is not tracking our money. You cannot get a handle on your finances if you have no idea where your money goes. This has not worked the previous year, so this time round; make it a point to keep a record of all your transactions. This will allow you to track what’s excess and be in a position to rectify any anomalies.
4. You also need to urgently get rid of not having savings. It is impossible to grow assets and achieve financial independence if you lack a savings habit. Most of us convince ourselves that we will save when we earn more. This is a falsehood that needs to be cut short if you aspire to grow your income. Instead, you have to use what you have today, even if it means starting with sh10,000 that you set aside consistently until it accumulates. Once you get the hang of it, you can set steeper savings targets with concrete goals, including one of investing what has been accumulated.
Alternatively, if you want to accumulate savings at a faster rate, you have to look for like-minded individuals and collectively save. However, this group/individuals must be formalised with rules and procedures to minimise misunderstandings and at the same time, the savings must be kept in a regulated financial institution.
5. The notion that every financial issue will be sorted by borrowing from someone or an institution is one that you need to shed this time round. Typically, people do not bother saving because they believe that someone will always be their emergency fund. It is important that you start taking responsibility for your bad money choices and not expect that someone else will sort out your financial mess. This should start with being deliberate about how you make financial decisions. If you lack information, be humble and seek independent personal finance advisory services.
Financial education is a lifelong endeavour with something new to learn at every point in your life cycle. At the same time, if you have borrowed from someone that you believe has more resources than you, it is good practice to pay them back as opposed to playing hide and seek and not picking or returning their calls. If you need more grace period, it is courteous to request it.
Remember, if you do not treat money well and be responsible for your action, it will remain a 'visitor'
All in all, as you make grand plans with your life, driven by the New Year’s euphoria to make a fresh start, its advisable to be deliberate about how you manage your personal finances. Get rid of any poor money habits that get in the way of achieving your financial goals.
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