The concept of new beginnings is exciting for many people, fostering a sense of enthusiasm to embark on fresh projects, hobbies, or activities, particularly at the start of a new year.
However, I must deliver a reality check. Before finalizing your New Year’s resolutions, it’s crucial to be aware that a staggering 80% of resolutions tend to fail, typically within a few weeks.
Rather than feeling disheartened by this statistic, it’s essential to recognize that cultivating good personal finance habits is possible this year to achieve your finance goals.
Here are the top five personal finance habits you should develop to bag thousands or even millions of pesos by the end of this year.
- Habit #1: Track your expenses diligently
- Habit #2: Automate savings and investments
- Habit #3: Prioritize debt repayment and set a realistic timeline
- Habit #4: Invest in upskilling yourself
- Habit #5: Wait at least 30 days before buying an item that’s way beyond your budget
- Habit #6: Surround yourself with like-minded individuals for support and accountability
Habit #1: Track your expenses diligently
Let’s face it. You can’t manage your budget without writing down the ins and outs of your money. Whether it’s a big-ticket item you bought at the Apple Store or a small bag of bread, make it a habit to take down notes.
You’ll thank your future self for doing this in the next three to four weeks until it becomes natural. There are plenty of free tracking and budgeting apps you can start with, or if you prefer a tactile version of this, a pen and paper are timeless tools.
Use a magnetic whiteboard (and markers) on your fridge door and invite all family members to jot down any expenses they had for the day. You’ll be surprised once the numbers keep coming. You will be more mindful of how you spend your money individually and as a family.
Habit #2: Automate savings and investments
The statement, “Save more money,” is overused in the world of personal finance. This time, hit it up with a notch through automation. When you automate your savings and investments, you eliminate the constant manual effort to be consistent in fund transfers.
Protect your salary or income from impulsive purchases on Shopee, Lazada, and Zalora. Sadly, when the 15th and 30th day of the month comes, it’s tempting to use the money on unnecessary expenses.
With automated transfers, the money is moved out of your spending account without you even realizing it. This creates a barrier between your income and impulsive spending, allowing you to save and invest more.
Habit #3: Prioritize debt repayment and set a realistic timeline
Bad debts like high-interest personal loans and informal loans are like termites that destroy the nooks and crannies of your home. They creep silently into your salary or income because of the compounding interest rates. You keep wondering why no savings are left once you pay your bills. So, this time, prioritize paying debts this year.
Dave Ramsey, a personal finance expert, recommends using the snowball method. You focus first on paying the smallest debt balances and then making minimum payments on other debts.
Once you’re down with the smallest debt, move on to the next, and so forth.
List all your debts and then consider the interest rates and minimum payments. From here, you can allocate funds and set a realistic timeline for paying off your debt.
Expect that this won’t be easy as you will adjust your lifestyle and spending habits, and perhaps you might consider looking for extra income to pay off your loans immediately. The key is to stop the bleeding of your funds so you can start saving and building emergency funds.
Habit #4: Invest in upskilling yourself
While it’s impossible to read 10 hours a day like Charles Munger or 500 pages like Warren Buffet, consuming content is much more efficient these days. It’s not surprising that these wealthy investors have built empires. This year, commit to investing in yourself through reading.
If you want to be better, become a voracious reader of personal finance, investments, and entrepreneurship books. Reading expands your knowledge and perspective about money. There are audiobook or eBook subscriptions like Amazon Prime and Scribd, offering you access to thousands of digital books.
On another note, you can also take free online courses relevant to your interests and career goals. Use your smartphone for productivity through these courses instead of scrolling through gossip and toxic news. If you’re financially capable, hire a coach to help set directions for your finances, career, and personal growth.
Habit #5: Wait at least 30 days before buying an item that’s way beyond your budget
Control your impulse spending with the 3-day rule strategy. It will teach you to be mindful of your purchases whenever “you feel” you need to buy something. It’s pretty straightforward: when tempted to swipe your card or tap the checkout button, wait for 30 days.
In this waiting period, assess whether you have a genuine need or just a fleeting desire or coping mechanism encouraged by well-crafted advertisements. You have all the time you need to think about it.
Here are some guiding questions to ask yourself:
- Is it a need or a want?
- Can I afford it in cash?
- Are there any alternative deals or better prices?
- If I use my credit card, can I sleep peacefully after swiping it?
- How can I afford it without withdrawing from my savings and emergency funds?
If there’s a nudging sense of urgency to buy the item, take two or three steps back and wait. This is pretty challenging, but if you make this a habit now, imagine how much money you’ll save because you rationally thought about it without using your credit cards or availing of a personal loan.
Habit #6: Surround yourself with like-minded individuals for support and accountability
Nothing beats the support and encouragement of accountability partners and a community when starting new habits. Virtually, you can find a dozen forums and groups that can inspire and motivate you to save and invest.
Facebook groups like PSE Daily for stock market updates and Chinkee Tan’s Iponaryo Movement for saving tips. Of course, always be careful when asking for advice, and take everything with a grain of salt, as what may work for others may not be the best route for you.
However, sharing insights, discussing challenges, and exchanging ideas allows you to gain new perspectives and broaden your horizons. Through open and constructive conversations, you can tap into a wealth of collective wisdom to help you navigate obstacles, make informed decisions, and accelerate your progress.
As we wrap up this article, it’s clear that personal finance is not just about setting New Year’s resolutions. It’s about forming healthy habits that will have a long-lasting impact on your financial well-being.
From diligently tracking your expenses and automating your savings to prioritizing debt repayment and investing in yourself, these are all habits you should adopt now. Remember, it’s never too late to start practicing these habits and taking control of your finances.
Which habit are you most excited to start implementing?
We can’t wait to see the positive changes it brings to your life.