Success doesn’t just happen. You have to have a plan in place and work toward it. If you want to be successful in school, a sport, or in your career, it is obvious to know that you need to put a plan in place and then follow the steps necessary to reach those goals. It takes a lot of practice and hard work to become successful in those areas. What you may not realize is that it takes just as much planning and discipline to be successful financially. For a more secure financial future, here are 11 financial habits of successful people.
This post is sponsored by CreditRepair.com. All opinions are mine alone and are honestly conveyed.
Set a budget
The very first step in figuring out how to secure your financial future is to figure out where you are currently. Write down all of your current sources of income and current expenses for each month. After all of your monthly obligations have been paid, the amount that is left over is your disposable income—to spend on the things that you want, but may not necessarily need. If you have no idea how to organize this, take a look at how to set your financial goals with these budgeting printables.
In order to be successful with your finances, you must have a plan for spending. Have you ever gone to a store and ended up spending way more than you anticipated? You found things that you really didn’t need, but they were on sale or it was just a good deal… Or maybe you were just a bit too hungry when you decided to go grocery shopping… I think we’ve all been there! It is easy to spend a few extra dollars here and there, and without realizing it, we have blown our entire budget for the week on groceries, but don’t feel like we have anything to cook for dinner. Setting a budget will help you to spend more intentionally and you will be less likely to spend impulsively.
Invest for retirement
You may be decades away from retirement, but that doesn’t mean that you should put off investing for it. Prioritizing saving for retirement is just as important as paying your monthly expenses. Regardless of whatever you think you may get from social security or any other type of retirement income, make sure that you are building your own nest egg.
Out of your disposable income each month, you will want to set aside some money for savings. This money can be set aside to help you pay property taxes, to pay car insurance or life insurance, go on vacation, or just build an emergency fund so you are prepared for the unexpected. As with contributing to a retirement savings account, build regular savings into your budget as well. Sometimes, it really cuts the budget close to pay for all of the necessary expenses each month and to save as well. Here is a unique way to not only have term life insurance coverage, but to also create a savings account for yourself and your family for the future.
Don’t live beyond their means
This sounds really simple, right? But it might not be as easy as you think. According to a recent study, the average balance on credit cards at the end of 2018 was over $6500. It can be really easy and painless to lay down the plastic to buy the items or vacations that you want, but it is real money that you are spending. And if you don’t have enough money to pay off your credit cards each month, then you may be living beyond your means. If you have laid out a budget, it is easy to see if you are spending more than you make each month.
Keep track of their credit
Do you know what’s showing on your credit report? Or what your credit score is? If there are things that are showing on your credit report that are dragging your score down, you will want to get those cleared up and removed. If you don’t know where to start, you may want to turn to a credit repair professional to help point you in the right direction.
Implement a diversified income strategy
This is just a fancy way of saying that you want more than one source of income for your household. For example, if one member of your household is working a single job and that job is the sole source of income, what do you do if that person gets laid off or fired? What source of income do you have to pay the bills? That is why diversifying your income is so important and have additional sources of income, which will create more financial security for your family. If there is a downturn in the economy or one source of income goes away altogether, your family still has money coming in from another side business or job.
Take advantage of tax breaks
Speaking of a side business, did you know that when you are self-employed, even if it is not your primary source of income, you can qualify for additional tax breaks? In addition to the extra income that you will make from a side business, you may also qualify to write-off additional certain expenses at tax time. Of course, you should consult a tax professional regarding your exact situation.
Carrying large amounts of debt on high interest rate credit cards can create a mountain of debt that you literally may never climb out from under. Having a large balance on a high interest rate credit card probably gives you a minimum payment that will only cover the interest that accrued during that month. In other words, you are making a big payment each month, but it is only going toward interest and never paying down the principle. In order to be successful financially, pay down credit card balances as quickly as possible.
Leverage debt for their benefit
Not all debt is bad, however. There are some types of debt that can actually be advantageous to your financial situation. For instance, utilizing loans such as a small business loan if you are self-employed or having a mortgage on your home can actually provide you with relatively low interest rates to leverage the debt, and even allow for tax write-offs. Again, you should consult a tax professional to see how this might affect your tax liability.
Willing to sacrifice short term to reach long term goals
Sometimes it is not easy to make the daily decisions that it takes to reach your financial goals. It is obvious that going on a luxury vacation and spending thousands of dollars could stretch your finances too thin or even get you into debt. But it may be less obvious that going out to dinner with friends every weekend, attending happy hour a couple of days a week with co-workers, or attending concerts a few times a year may be adding up to cost you thousands of dollars each year. For example, if you go out to happy hour just three days a week with friends for a couple of drinks and appetizers—let’s say that costs you an average $20 per happy hour. So that would be $60 per week, and if you do that on a consistent basis, you may be spending over $2000 for the year. Add that to dinners out, concert tickets, and other entertainment and it is easy to see just how much you may be spending on short-term fun, rather than long-term goals.