Wealth building starts with the right behaviours in place. Break these 7 bad habits to get started on your journey to riches.
While we all intend to build wealth, it happens when we develop the right behaviours. Many people do not realise that their behaviours are keeping them away from meeting financial success. Here are 7 habits that you should break as you start on a successful financial journey.
1. Not making a budget
As the old saying goes: failing to plan is planning to fail. Paying off debt, building up savings and investments, owning what you need… it all requires a plan. The plan, when it comes to money, is a budget. You need to keep your expenses below your income; you need to save up to that car you want to buy; you need to have an emergency fund in place – all of this requires budgeting. Don’t worry if you find it challenging to stick to a budget; it takes time to get it right – you will modify it every month for the first few months, but once you figure it out it will help sort out your money problems quickly. A budget gives every penny you earn something valuable to do.
2. Not saving till you make it big
Far too many people think that they will start saving once they start earning more than they spend. This sort of thinking is what stops you from financial success. You don’t save what you don’t spend – you spend what you don’t save. The first thing you do when you earn an income is to save towards your goals. Then, live on whatever is left over. It doesn’t matter how little you earn, make saving a habit now and reap the benefits of compounding later.
3. Not investing till you have a corpus
When you ask someone why they don’t invest – the most common answer you will hear is that they don’t have enough money to invest; that it is something the rich people who have enough to gamble do. The fact is you do not need lakhs to invest. You can start with as little as Rs 500 a month. Wealthy people invest not because they have wealth, but because it was an investment that earned wealth for them in the first place.
Investing builds wealth – but do not expect to become a crorepati overnight. Invest for the long-term. Plan and work with at least a five-year horizon, if not more. Be disciplined with your investments and give them to grow.
4. Spending what you expect to earn
You expect a raise at the end of this year; that investment you made is about to mature in 6 months – you will be able to use this money to pay up the debts you take on today. This is another reason why you stay broke. Don't count your chickens before they hatch. Your expenses today must be based on what you earn today, and not on what you may earn in the future.
5. Expensive socialising
This happens more often if you live in a large urban centre. You go out with friends and co-workers twice a week, go on a dinner date twice a week, eat out as you are driving back home with your partner – you may not realise, but these expenses eat into your budget. Start cutting back a little. Try to find more economical options – why not organise a get-together at home instead of going out? How about meeting at a museum or a walk in a park rather than in a coffee shop? Why not go to a free event for a date once in a while?
6. Can’t resist a sale
Sales are a great time to buy stuff. You get what you want, and you also save a little money. That feels like a victory. But did you buy that bag because it was on sale even though you don’t need it? Did you buy that dress because a buy-one-get-one promotion even though you may not wear it more than once? Sales can prove costly if you end up buying stuff that you don’t need in the first place. The bag was available for Rs 5,000 instead of the usual Rs 10,000 – but you wouldn’t have bought it at all if it was not on sale. You just spent Rs 5,000 on it; you could have saved it. A good deal is only useful if you need the item you are getting.
7. Borrowing for everything
Money makes the world go round. If you need some more, don’t hesitate to ask. But remember only ask for what you have earned. You think you are not getting paid enough – ask for a raise. Your boss will not give it to you unless he has to. Running short of money? Find a side-hustle to earn you some more. Do not borrow unless you have absolutely no other way out. The debt you take on needs to be serviced, and that will only make things even more difficult in the future. Plan your spendings today, build an emergency fund, don’t worry about keeping up appearances – and you will not have to borrow in the future. How money-savvy are the millennials? Read this interesting piece.