Most people in this world dream of becoming rich in life but few succeed. Have you ever wondered what the characteristics are that separate the rich from the others? One of these characteristics is consistency.
You need to understand that simply working hard and sacrificing your free time to build wealth is not enough. The key to creating wealth successfully lies in being consistent with how you manage your money.
Let us explore 8 habits that will help you to be disciplined and consistent with your finances.
8 Habits to Improve Your Financial Discipline:
Habit 1: Maintain A Monthly Budget
The first step to achieve financial freedom is to create a monthly budget which will help you stay in control of your income and expenses. At the beginning of the month make a list of the expenses what do you expect to incur and then carefully account for each expense as it happens. Constantly watching where your money is going will help you to identify where you went over your budget and take remedial actions to reduce the outflow of money.
Habit 2: Reduce Wasteful Expenditure
To maximize the amount of money you can invest you will have to spend in a very disciplined way and reduce wasteful expenditure wherever possible. A great way to reduce your expenditure is to look for good deals and discounts while purchasing everyday items like groceries and other household goods. Look for discount coupons on online shopping sites and trying to save money wherever possible.
Always remember that if you end up spending too much then you will have very little left to invest. Exercise extreme discipline and reduce wasteful expenditure wherever possible.
Habit 3: Don’t Borrow Money
While the prospect of borrowing money to fulfil your desires is extremely attractive, it is a sure-short way of ruining your financial future. Hence you will have to be extremely cautious about borrowing money, especially taking loans where you will have to pay a high rate of interest.
A number of people now a days end up taking credit card loans which attract sky high interest rates and fees. And if you are unable to repay the money regularly you will have to pay penalties as well as GST to the government for the outstanding amount.
In any case a loan repayment instalment will drain out your monthly income still you repay the principal and interest amount fully. Hence always exercise a lot of financial discipline and avoid the or of buying non-essential goods with borrowed money.
Habit 4: Pay Off Your Debt First
If you have already taken a date and are paying instalments, then try to repay it as soon as possible. Not only will this reduce the strain on your monthly budget, but it will also leave you with more savings which you can invest in income generating or value appreciating assets.
Habit 5: Manage Your Financial Liabilities Other Than Debt
Financial liabilities other than debt include financial obligations like lease payments, insurance policy payments mortgages etc. You have to maintain your outflow on these items in a very disciplined way just like we mentioned in the previous point. If you have too much of money going into them, then it will hurt your financial health and hamper your ability to create long term wealth.
The best way to manage these is to repay them fast by reducing your monthly expenses. You must also carefully evaluate the need to get into any new obligations so that you don’t end up draining your monthly budget further.
Habit 6: Save Regularly Every Month
We have interacted with many people who are very regular with their savings. Most of the time they end up spending too much in a month and then they find that there is nothing left with them. In many cases they also end up buying items using their credit cards and taking personal loans in extreme cases.
You will have to make a habit of setting aside 10 to 20% of your monthly income as soon as you receive it. Thereafter stick to the monthly budget that you have created and get rid of the urge of overspending. Not only will this give you enough savings every month, but it will also help you become disciplined financially.
Habit 7: Build An Emergency Fund
You will also have to build an emergency fund for yourself which will cover your expenses for at least 6 months. This fund will help you to meet your expenses in case you lose your regular source of income due to illness or a job loss. An emergency fund will also enable you to cover a sudden emergency and other need for money that may arise. You need to keep the money in liquid assets which you can easily access at a short notice.
Habit 8: Invest Regularly
Once you have set aside the money for an emergency fund it is time for you to invest your savings in income generating assets. Some example of these assets are gold, silver, bonds, debentures, shares of companies etc. You have to be extremely disciplined while investing as well. Many people often take sudden decisions to invest in shares and other assets whose prices are going up. They get lured by the prospect of making quick profits and get into an investment which they often regret later on.
To invest consistently we will have to control this urge. While investing slowly and consistently may not be as exciting as investing a lump sum and earning quick profits, it is the habit that will protect you from making severe mistakes.
Conclusion
The journey of creating wealth is not very smooth or even easy. However, if you stay discipline and put up the time and effort required to build wealth you will certainly be successful in the long run. So, start building wealth in a disciplined way right now.
If you need any help with investing in a disciplined way then you may explorer our proprietary index long term strategy that hundreds of our investors have benefited from. Get in touch with us to know more about it.
Happy Investing!
This article is for education purpose only. Kindly consult with your financial advisor before doing any kind of investment.
