How to Build Good Financial Habits
Sometimes, simple can be better.
In fact, when you’re trying to build up good financial habits, “simple” can be the key to reaching your goals.
A one page financial plan is a simple overview of your financial situation. It can help you with your everyday money decisions, and it can provide guidance when you decide to begin building your wealth creation plan by investing in houses.
Your plan should include the following attributes.:
- Specific goals that define what you want to achieve and which are aligned with your values and your personal situation
- Clear, actionable steps that lead you towards your goals
How to get started
Figure out the core reason(s) why you want to become financially independent.
These should be reasons that will encourage you when things get tough, and when you’re making choices about buying, selling, renovating, etc.
Set specific goals
Using your “why” as a guideline, design goals that are specific and actionable.
Prioritise your list, naming the top three to four most important goals, specifically stating your intentions.
Then, list three to four specific, actionable steps you need to take to meet each goal.
Put together a net worth statement
To gain a clear view of your financial situation make a list of your assets and your liabilities.
The net worth statement provides a good overview of your progress towards financial freedom, whether that includes paying down bad debt or saving a deposit to begin investing in houses.
How to keep going
Your budget won’t be perfect. In fact, nobody’s is. There is no such thing as a perfect budget.
It should, however, be a living budget.
Find the best combination of spending and saving that aligns with your personal situation and put your budget into action.
Stay on top of your spending plan, tweaking it as you go along until it becomes second nature.
Make saving a priority
Obviously when you first start investing in houses you’ll need to save a sizeable deposit, however don’t stop saving with your first…or your last investment property.
Saving always needs to remain an important part of your financial plan.
Avoid budget busters
Bad debt can present a barrier to investing in houses.
By reducing your serviceability and your options.
Did you realise that your borrowing power is reduced by your credit card limits, even if you’re entirely debt free?
Lenders typically assess your credit card payments at two to three percent of the total limit.
This means that if you have a total credit limit of $12,000, most lenders assume a monthly payment of $240 to $360, even if your balances are zero!
But if you reduced your credit limit by $10,000, you’d effectively increase your monthly disposable income by $300; a yearly increase in pay of $3,600!
Is building your wealth your New Year resolution?
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