What we get in our life is the result of our habits. Same is for our finances as well, if we practice good habits than our finances will grow in the long run, whereas if do not follow good financial practices than our finances will not grow.
Some Good & Bad financial habits
What are the good financial habits?
Revisiting your portfolio regularly
Keeping a track on your portfolio is essential. If you will not keep a track on your portfolio than you will not be able to recognize the underperforming assets of your portfolio, as a result your money will be blocked in such assets and your financial growth will be affected.
Budgeting your expenses
If you have not allocated predefined limits to your expenditure than you are in for a big financial trouble. If your expenditures are properly budgeted than, you will know that how much you can spend on a particular item this leaves you with enough money to be invested.
Creating an emergency fund
A person should always keep a fund equivalent to six months expenditure in the emergency fund. By keeping this money in the emergency fund you can safeguard yourself from sudden happenings of the life. For ex- if you have lost your job than this emergency fund will help maintain your expenditure till the time you get a new job.
Always have an exit strategy for your funds
If you don’t have an exit strategy for your funds than you will keep on holding the same fund for a long period of time which will ultimately lead into your money getting blocked in dead funds or the funds yielding less returns.
Pay your bills on time
Pay off bills as soon as your salary hits the bank account. If you regularly let payments run past the due date, you will rack up hefty late payment fees. Worse, your credit score will take a big hit
Make regular investment
You should always invest at least 30 to 40% of your income. This investment should be made for a longer period of time so that the fund so accumulated can be used as your retirement corpus.
What are bad financial habits?
Overspending on Luxuries
Eating out often, catching a movie at the multiplex every weekend or going away for short breaks every now and then may give you a high, but will severely dent your savings. Outline a specific amount you can allocate to such spends in your monthly budget and stick to it.
Excessive use of credit cards
The use of credit card can make your expenses over budget, since you have to pay for your purchases one month after the actual purchase but the main thing is that you have to make these payment anyways.
Neglecting maintenance of your products
If you are not maintaining your products such as your car, air conditioner, refrigerator etc properly than there will be a need to change these stuff regularly which will result in heavy cash outflow.
Using credit cards for rewards
Avoid swiping your credit card for every purchase just to earn reward points. Else, soon you would be living beyond your means. List the expenditures you can make with a credit card and those you cannot.
Not paying attention to your credit score
Your credit score is the only tool in your hands which determines your future financial position. If your credit score is not good than you will not be sanctioned any loans in future.