It can take years of experience to develop good financial habits, but the benefits of being responsible with your spending are well worth any effort it takes to develop good practices. When you have your finances under control, you can keep you and your family out of debt, you can maintain a strong credit score, and you can get the financing you need for large purchases such as a home or a car.
1. Track your finances
This is step one for a reason! You can’t set a budget, plan for retirement, pay down debt, or cut back your spending if you don’t know where your money is going. When I say track your money, I mean every. single. dollar.
2. Buy value
By “buy value,” I mean you neither by the cheapest goods, nor the most expensive. Instead, you look to buy the best value for the money. Sometimes it’s worth it to cough up a little extra dough for a product you know will last, rather than paying bottom-dollar for shoddy merchandise you’ll have to constantly replace.
On the flip side, keep in mind not all products are better simply because they’re more expensive – often they’re just more expensive because of perception. Read reviews and shop around.
3. Read one financial book each year
If you want to become financially stable, you’ll have to seek advice from the financial masters. Easy to do, since nearly every one of them has at least one book available.
Take advantage of that knowledge. If you only get three or four bankable ideas from reading a single book, think about how many you’ll get from reading a dozen or more.
Some of the personal finance books that I’ve enjoyed over the years include: Dave Ramsey’s Total Money Makeover, David Bach’s Smart The Automatic Millionaire, Ramit Sethi’s I Will Teach You to Be Rich.
4. Keep your budget simple
If you’re into personal finance, it’s easy to geek out on all the apps, graphs, and financial tools available, and it’s also easy for our finances to get too complicated with tons of budget categories, subcategories, and the like. Take a more minimalist approach and sticking to a budget might be much easier. Remember, you don’t have to track every single penny to maintain good money habits.
5 Having an exit strategy when investing
Without one, it is tough to recognize the right time to cut your losses – or take profits off the table.
6. Treating your household like a business
By taking an active role in managing your finances – and looking at ways to maximize your income – you’ll ensure a brighter financial future for you and your family. Who knows; maybe you’ll even stop biting your nails.
7. Cook at home more often
Cooking at home not only saves you money, it’s also healthier for you. Plan your meals each week (even when you’re on a tight budget), upgrade your brown bag lunch, and enjoy delicious meals at home without spending a lot. Or mix money matters and meals: Organize a workplace money lunch, which is part financial support club and part lunch club.
8. Properly maintaining your car
By following your car’s maintenance schedule and paying a little up front, you’ll reduce the risk of encountering more costly major issues down the road.
9. Buy businesses
Wealth is created and preserved through owning businesses. Begin investing early in life. Buying a business usually means buying shares of stock in a company. As a stockholder, you own a portion of the business. You should use the same criteria for deciding to buy a stock as you would use for deciding to buy the entire company. Before you buy shares in a company, consider whether you would buy the entire business. Invest in companies that you really like and that earn money. Use those earnings to buy more businesses.
10. Give back to Society
When you can afford it, donate some of your wealth to worthy causes and for the betterment of society. You can always contribute your time and effort to deserving charitable foundations and organizations. Mr. Buffet has donated around 85% of his wealth (over $37 billion in 2006) to help solve some of the major problems in the world.