Breaking Bad (Financial Habits)
Rather than teaching you how to undertake dubious operations in a caravan somewhere in the desert to fund some medical treatment, we’ll focus in on how to meet your financial goals through discipline and strong money habits.
Making a plan for a better financial future is the first step you need to take. The second step will be actually doing it – it’s this bit that is often most difficult. At Wombat we believe it all comes down to habit. Once you get in the flow of it and you’ve repeated the process a number of times, they will become second nature to you.
Let’s take a look at the money habits you should take on, and which elements of your current bad money habits you need to get rid of.
First, budget. Then, pay yourself
Before payday even arrives, sit down to work out your typical monthly expenses. This should include everything from rent to groceries, and a (reasonable) entertainment budget. Your budget will be crucial for tracking your spending and allowing you to live within your means.
After you’ve created your budget, take a look at your typical pay check and see what you can afford to put aside each month.
As soon as that pay check comes in, you’ll first want to put some money aside for an emergency fund (typically at least three months’ worth of expenses). After the emergency fund is ready to go, start putting this money towards your investment account.
Stick to the budget
After you’ve paid yourself by contributing either to your emergency savings account or to your investment portfolio, stay as disciplined as possible and follow the plan. This will probably be the most difficult in the first couple of months of changing your habits, but once you stick to it for a while, it’ll become second nature.
A budget is telling your money where to go instead of wondering where it went
- Dave Ramsey, American Businessman
The aim is to get to the next payday with the budget intact so that you can start the healthy financial process all over again. It’s always helpful to remember that you’re doing this so that you’ll have a more secure and stable financial future. The effort will certainly be worth it!