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Smart Money Habits To Future Proof-Your Life

 

Nothing in life is certain. In fact, the only thing we can be sure of is that circumstances will change and there are likely to be bumps in the road. Despite our best efforts at some point in our lives, we will face difficulties. All we can do is to mitigate risks as much as possible and take sensible steps to avoid the pitfalls.

It makes good financial sense to adopt healthy money habits from a young age. But even if you haven’t done this already, it’s never too late. Habits take practice, and this takes time. So start now and take the necessary steps to future-proof your life and the life of your family.

  1. Determine Where Your Money Is Going

When making changes to your finances, the first step is to outline all the money you have coming in and the money going out. Money coming in should be fairly straightforward. But what about your outgoings? Sitting down and making a list of your monthly bills shouldn’t be too taxing. However, how do you account for all those daily payments you make? For example, the newspaper you buy a couple of times a week, coffees from the local coffee shop, snacks, treats, birthday cards, etc. All of this mounts up, and it can be difficult to ascertain where your money is going.

To get an accurate picture of your spending, it is necessary to track every purchase. To do this, you can use a good old-fashioned notebook or an app. You can’t start planning until you have a full idea of your current position. Seeing your outgoings set out like this can be surprising, and the thought is a little daunting. However, you will notice patterns emerging, and this will help you to cut your costs and change your attitude to spending.

 

  1. Save

This may sound like an obvious point, but not everybody considers it. Yes, we may save for holidays and house deposits, etc. as the need arises. But what about all those things in-between? How many times do you come unstuck when you failed to account for a tax bill, or you’re scrimping and saving before Christmas to manage all the gifts and decorations?

When we think of saving we often think about large sums of money. However, even small amounts accumulate over time. For example, $50 a month is $600 per year and would cover most people’s Christmas costs. If you can afford just $10 each month, over a few years, it may pay for a holiday or an unexpected bill.

Consider opening a savings account that is separate to your checking account. This separation may help avoid tapping into your savings for impulse purchases.

 

  1. Invest In Property

The phrase ‘as safe as houses’ comes from the idea of property being a secure investment. Times have changed of course, and some knowledge and discretion are required, but it still pays to invest in property. Renting may be fine in the short term, but all that money will be filling someone else’s pockets. If you invested it into your own property, you would benefit in the long-term.

If this is an option for you, start looking at property for sale, and do some research. Look for up and coming areas and expansions to transport routes. Remote areas that will soon be connected to commuter routes may be lucrative.

If you already own your own home, you may want to consider a second property and buying to let. There are never any guarantees, of course, but investing wisely could yield a worthwhile reward. Make sure you’re aware of the market before you begin and beware low-interest mortgages. Though they may provide a great incentive in the early stages, what happens if they suddenly increase? Can you withstand a rise?

  1. Cut Your Bills

Though many financial blogs and magazines advise consumers to shop around, still many people are paying too much for services. There are many smart ways to save money each month. Cutting the cost of your energy bills by a couple of hundred dollars a year is an easy way of saving money. You won’t even feel the pinch. For the sake of filling in a quick online form or undergoing a twenty-minute phone call, the savings can be dramatic. Add your mobile phone and broadband into the equation, and the saving could equate to a small salary bump.

It is estimated that the majority of energy consumed in the home comes from your HVAC system. Making small changes such as changing air filters and sealing cooling ducts can reduce energy consumption by as much as 20%. Installing a thermostat that can be programmed is also useful, so your system only works when you’re at home.

When it comes to cutting outgoings and making savings, this is where the tracking mentioned in point 1 comes into its own. There are lots of small savings to be made that will mount up over time. For example:

  • Make your own coffee rather than purchasing from a coffee shop each day. This could save you around $50 per month or more.
  • If you’re not making use of subscriptions, then cancel them. This includes gym membership, magazine subscriptions, etc.
  • Save money on gas by walking or cycling. This will also benefit your health.
  • If you need to take the car, share expenses by carpooling.

 

  1. Use Credit Cards Responsibly

Credit cards can be useful in emergency situations, and having a credit card can help with your overall credit rating. However, if you use your cards for impulse purchases, then they can quickly become a financial drain.

Try to limit your card’s use to payments that can be completed within three months. Another solution is to set aside a small savings account that you contribute small amounts to on a regular basis. This can be used for unexpected costs such as the television breaking, etc.

  1. Downsizing

Many people throughout the world are realizing the benefits of downsizing. Reducing their personal possessions to manageable levels and moving into smaller properties, will free up a large chunk of your monthly expenses. Going through that process forces you to address your attitudes and spending habits. So, as well as saving money on mortgage repayments, it can help you adjust future spending.

  1. Addressing Your Spending Habits

If a significant portion of your money is spent on impulse or ill-advised purchases, it makes sense to review and change your spending habits. It helps to spot the triggers associated with your spending. For example, if at the end of a bad day at work, you make yourself feel better with a new pair of shoes or an expensive bottle of wine, this could mount up over time. Boredom is another common trigger, as is stress and general dissatisfaction. Once you’re aware of this, you can make adjustments so that you’re not spending to make yourself feel better. Try substituting this with something else instead, such as a walk in the fresh air, a bubble bath, a trip to a gallery or the library.

Another common scenario is the night out with friends. Once you’ve had a couple of drinks, your willpower tends to wane and, added to that, you have peer pressure. If this happens frequently and you’re spending money on drinks and clubs, etc. then it’s time to make a change. Set a budget for entertainment and stick to it. Make sure your friends are aware and don’t let drinking get out of hand. Another good strategy is to leave your card at home and only take enough cash for a few drinks and your transport home.

  1. Plan For The Unexpected

We can’t control everything that happens in life but we can make them a little easier to deal with should the worst happen. You’re never aware that your boiler is about to break down or your partner is going to become ill, or you lose your job. Some of these scenarios can be extremely distressing and worrying. If you also have to worry about your financial situation, then this adds to the burden. However, if you have a contingency fund, it can lessen the blow a little.

Look into insurance policies to protect you and your family in extreme circumstances. Shop around and review the various options carefully. Set an affordable percentage of your salary aside each month to create a fund for unexpected costs.

 

  1. Plan For Your Future

When you’re just starting out in life, retiring seems like a million years away. But it’s not. And the better your retirement planning, the quicker you can retire from work and do all those things you’ve wanted to do. It pays to establish a pension scheme as soon as possible. Opt for a policy that can be moved if and when you change jobs. A financial advisor will lead you through the process and find the best solution for you.

  1. Pass On Good Habits

And finally, as you develop smart money habits, ensure your share them with your children. The quicker they grasp these lessons, the easier it will be for them to be smart with their own finances. Adopting good money habits from a young age leads to a more secure life and a healthy financial future.