5 Financial Habits to Start in 2018
1. Track Your Spending
This is not a BUDGET! No one likes the word budget. I find if you simply track your spending each month, your eyes will be opened to where your money is going and where change needs to happen. Plus, it will reveal the months of the year where excess spending occurs; for example, December for the holidays, August for back to school shopping, April for taxes. Once you have this knowledge and know how much you’re actually spending in these months, you can better prepare for them. The worst case scenario, is you find out that over a 12 month period you actually spend more money that you make! Now you’re empowered to make a change. Below find a list of free financial tracking software where you can track these expenses from your phone:
-Spending Tracker (Apple App only)
-Spendee (App for Android/Apple)
-Simple spreadsheet (but this is only for those spreadsheet lovers out there)
2. Monthly Meetings With Yourself and/or Your Partner
For those of you who are single, and this is over 50% of the US population, it’s important that you sit down soon after the month ends and make sure that all of your expenses were tracked properly. From there take a minute to review how you spent your money. Is it leading you to your financial goals? Do you have any financials goals? If you have a partner/spouse whom you share your life with, it’s even more imperative that you take the time to review your finances on a minimum of a monthly basis. You should make financial goals together. That could be a trip to Disney Land this year, and you project you will need $4,000 to take the entire family. It could be you want to invest in a vacation property for some passive income potential. You need to save $50,000 for a down payment. The reason for this meeting is to let your dreams come alive, and figure out a way to pay for them. You may realize that you are financially strong enough that one of you can finally stay home, if you cut out daycare, commuting costs, etc. I find that our society focuses so much on physical and emotional intimacy with our partners/spouses, but it fails to mention the strong bond that occurs between partners/spouses who have financial intimacy. There’s strength in helping each other’s dreams come true and working towards shared goals.
3. Track your Net Worth
This can be done during your monthly meeting. It’s amazing how many people have no idea what their net worth is, let alone how to calculate it. Growing your net worth is your ultimate financial goal in life. Your net worth is simply your Assets minus your Liabilities (debt). When you review your net worth each month you are actually deciding how long you have to stay in the “rat race” before you can retire, or work on a passion, verses work for money. By tracking your spending habits, and knowing your net worth, you can calculate out how long you must work. For example, if you know you spend on average $3,000 a month to live (based on your monthly spending tracking), and your investment gains 4% yearly on your net worth of $500,000 in investments, you could not work for up to 20 years. Or let’s say you have a family to support, and you know that you spend $6,000 a month in expenses, then you would need to have a net worth of $980,000 which would give you the same time of 20 years while earning 4% from your investments. (This data was calculated using the “Ez Calculators app” and used for presentation purposes only). Of course, net worth is more than just money invested in stocks and bonds. Your real estate equity and other hard assets count towards that number. We’ll go into this in more detail later. This just shows how important it is to know where you stand with your net worth. I wouldn’t want to work at a job that I didn’t like, any longer than I had to. So know your numbers! Below are a few ideas on how to track your Net Worth:
-www.personalcapital.com (I’ve just started using this and love its ease of use and up to date information)
-Excel has multiple free templates for Net Worth Trackers
-Check in your App store for Net Worth Trackers
4. Grocery Shop weekly with a list
This sounds like advice you have heard before, but it will amaze you how this simple habit will affect not only your purse strings, but also your fitness level. Grocery shopping is the most common reason we find ourselves in a physical store. When in a store, it is tempting to throw a few things in the cart that were not planned (like that bottle of Nutella). So if you go to the store as needed each day, you are exposing yourself to more temptation to spend money on things you don’t need. That’s why it’s important that you go into the store with a plan (aka, a list). The list is not full protection, but it does help. Also, just the mere fact of creating a list makes you plan your meals for the week. I have found that when I have at least a rough idea of the meals I want to make for the week, that I tend to snack less in-between meals, as my meals were prepared timely, and were filling. I personally have lost a few pounds simply from making a grocery list. So I save money and work on my health goals at the same time! Now that’s a Win-Win!
5. Spend Time DOING What You Love
I know that most of use love to curl up and watch a movie with a bowl of popcorn from time to time, however, you will notice that I put in bold the word “DOING” what you love. So this is not meant for you to do more resting (which is what TV & video gaming are), but for you to DO the things you love. For example, sewing, woodworking, kayaking, hiking, cooking, etc. You will find that you will feel more energized, your confidence will grow, your self-esteem will rise, and your knowledge base in that category will increase. Having a confident knowledgeable person can only lead to more financial stability. You could someday create a side hustle (small business, side job) that you love and that brings you some extra income. Who knows, if you become so good at what you love, you may be able to earn a full-time living from it. Self-improvement and learning should be constant goals in our lives. For example, I started learning on my own time about digital marketing and social media so that I could better advise the owners who I was consulting (I’m a business consultant by trade), and realized I had a passion for the digital space, which lead me to creating this blog! Now I’m spending time doing what I love by combining two passions of mine, the digital space and finances.