Closely look at your account statement. The answer is somewhere in there. Do you see any problems with your spending habits? Are you indeed in control of your finances? If you realize your answer is no, then it's time to make some simple tweaks to your lifestyle to change your spending habits
Thanks to online shopping and smartphones, the world is quite literally at your fingertips. It is rapidly increasing people's habit of impulse shopping. According to reports in the last two years, Especially in 2020, Impulse spending has increased by 18%.
Start small if you want to change your lifestyle. Develop good money habits because small, consistent, and disciplined habits can give you big financial gains at the end of the year.
For instance, instead of spending ₹500 per meal every weekday, plan your meals well ahead of time, perhaps during the weekends. So, when you have a plan in place, you will be less tempted to order. This way, you would be able to save ₹1,30,000 a year. You could have either invested in this further or taken a holiday.
If you are curious about what these small changes in money habits are, then keep reading.
Bad Money Habits That Put Dents In Your Budget
Impulse To Swipe Your Credit Card
These magical plastic cards make it so easy to pay for those expensive heels you have been craving for so long! But stop. Would you have the money to pay that amount back next month? If you are unsure, you have your answer. Credit card companies charge high-interest rates if bills are not paid in full on time and you develop an outstanding balance.
Shopping When You're Bored Or Emotional
Emotions are very bad for your bank accounts. Back in the day, home shopping networks would lure you into making unnecessary purchases when you were either half asleep or bored. Online shopping has replaced those home shopping networks. It has become easier to browse through shopping apps and place an order from your smartphone without moving from your seat. This is a very bad money habit that prevents you from saving money.
Habit of Stockpiling
Remember those times when you suddenly come across a 'buy one, get one' offer on peanut butter while grocery shopping? You feel like you just can't let it go, even though you know that you do not need two of them, or one might expire before you can even finish the first jar.
Similarly, as soon as a notification of a 50% sale pops up on your phone, you get the itch to start browsing and buying immediately, right? Even though you may know you do not need it! Well, that's what this point is all about. The habit of stockpiling can lead to spending more.
Shopping As A Status Symbol
Do you often go out with friends and feel like you should buy something when others are also buying it? You do not want to go out of the store empty-handed, unlike them!
It's so easy to get caught in the rabbit hole of celebrity fashion or the desire to impress others with the things you have. Shopping as a status symbol may boost your ego temporarily, but ultimately, it will leave you struggling financially.
If you are contemplating ‘How can I improve my money habits', here are our quick and easy to apply tips.
13 Positive Money Habits For Financial Success
1. Give Yourself An Allowance
According to financial gurus, 50% of your salary should be used on your living expenses, 30% should be allocated for your wants, and 20% should be invested regularly. As soon as you get your salary, out of that 30% that ideally should be used for your wants, set aside 30% of that as savings. Saving habits like this can help you build your emergency fund very easily (we will come to it in a minute).
2. Budget Monthly Expenses
The first step to start building good money habits is to get on a budget. When you have a set budget for every month, and you become disciplined about expenses. So, pay your bills every month on time, pay premiums before the due date and ensure you do not miss them, set aside money for your cash savings as soon as you get your salary, and be vigilant about avoiding impulse shopping. If you make these rules your habit, you will find it much easier to manage your finances.
3. Create An Emergency Fund
An emergency fund is for unexpected or unforeseen expenses like medical emergencies, your car breaking down, repair work, kids' field trips, etc. It may seem unimportant when everything is going fine, but the recent COVID-19 pandemic has proved how important having an emergency fund is. Set aside a portion of your net monthly salary toward building an emergency fund.
Financial experts suggest your emergency fund should be 9 to 12 months' worth of your living expenses. Make sure these expenses are only for food, utilities, loan repayment, kids' school fees, etc.
4. Pay Off Your Credit Cards With Highest Interest Rates First
Credit card companies charge 14% to even 46% interest on your outstanding bills. Paying only the minimum amount due can quickly conjure up your credit card bill. To find out which credit card charges you the most and pay them off first. Strictly avoid late payments and having outstanding balances on credit cards.
5. Buy Groceries Locally
Online grocery apps have made everyone's life easier by delivering their essentials to their doorstep. But, have you noticed the amount of money you are spending on delivery charges and additional taxes?
If you compare that bill with that of roadside vegetable sellers or local supermarkets, you will understand how much extra you are paying in the name of convenience. If you are serious about developing a saving habit, take a trip to your local farmers' market on the weekend to buy farm-fresh products. They are healthier and equally cost-effective.
6. Take A Walk
We know how hassle-free it is to get on your bike and zoom past the traffic to quickly run errands. But in reality, you are spending valuable fuel, which is already very expensive.
So, next time you have to go to your local grocery store or run errands, walk to your destination. Thus, you will conserve money, and develop a healthy lifestyle.
7. Start Investing
You might have heard your elders droning on and on about investing. It is true. It is one of the money habits of rich people. They invest heavily in equity. If you are a beginner, start with equity mutual funds.
Start a SIP immediately when you get your first job. Today, mutual funds are extremely safe for saving a big amount of money at a fraction of the cost, thanks to their high returns. On average, you can expect a 10% to 15% return on your investment, whereas banks are offering up to 6% returns.
So, the amount you are spending on eating out every weekday, as we mentioned earlier in this article, if you invested that same amount, for 30 years, you would have ₹5,55,70,556 saved.
8. Automate Your Finances
A small step toward building daily money habits is to automate your finances. Make your life a little easier by setting up automated bill payments and even transferring money to your savings account. Although you have to review your costs diligently every month, it's an excellent way to start building wealth.
9. Plan Your Shopping
Like you plan your expenses and investments, you should plan shopping too. We would suggest you be smart and shop during big sales. For instance, if you need to purchase a large appliance for your home, wait until the Diwali sale.
If you want to stock up on the latest fashion and winter wear, the Black Friday sale would be perfect. Thus, planning your shopping strategically can help you save a lot more money.
10. Start A Passive Income
One of the greatest money habits of wealthy people is that they have multiple sources of income. Many high net worth people have multiple real estates. They rent out their properties to earn more money instead of letting them just sit. So, instead of relying on payslip to payslip, start a gig that brings you passive and consistent income. You don't need to go overboard; start small.
There are many ways you can create a passive income. For instance, do you have a spare bedroom? Consider renting it out on Airbnb, which brings in regular income. If you have a car that is sitting in your garage and gathering dust, enlist them on ola or uber. If you have a hobby, start a side hustle with it.
11. Use Leftovers
Do you tend to cook a lot of food in batches? Then you might have leftovers as well. Instead of wasting money by wasting food, create new dishes. Check out videos online to learn creative ways you can use your leftovers.
12. Repair and DIY
Be it a car, a phone, or a piece of furniture- it is normal for things to break down once in a while. But instead of rejecting and tossing it out, it is much easier to get it repaired by a mechanic. Or you can do it yourself. Thus, you will reduce waste and save money. This is a great way to develop positive money habits for students.
13. Invest Spare Changes In Digital Gold
If you like online shopping, you may have seen that your payment value is, in most cases, an odd figure. Jar, India's first automated investment app, rounds up these odd numbers and automatically invests them in digital gold for you. It's a smart way to start building wealth with spare change from your online transactions. Your investment could be as low as ₹1.
For instance, suppose you ordered an air conditioner worth ₹25,288. Jar app would round this amount to ₹25,230 and invest the ₹2 spare change in equal amounts of digital gold.
To get started, read our blog on how to use the Jar app. Install the app and begin your investment journey today.
Final Thoughts
We hope these saving habit tips have helped you. We know breaking bad money habits can be challenging, but it is essential for achieving financial success. When you start your journey of building positive money habits, you will see how quickly you will be able to plan your future, reduce impulsive spending, better handle unexpected expenses, and ultimately achieve financial freedom.
