Habits make up a much larger part of ourselves than we’d like to admit. Studies have shown that habit is more important than willpower when it comes to deciding our actions. It’s no surprise then that, when it comes to being financially stable, one of the key elements is forming and maintaining healthy habits.
But what habits are those? More importantly, which should you cultivate to become financially stable yourself? That’s what this guide is here to answer.
While a dollar here and a dollar there may not seem like a lot, one of the keys to being financially stable is understanding that small, consistent drains on your income can add up to big numbers in the long term. For example, one $2 cup of coffee isn’t much, but one a morning for a year adds up to $730. Minimizing even small but consistent costs can lead to big savings.
There’s an old axiom that says it’s impossible to get where you’re going if you don’t know where that is, and the same principle applies to finance. If you don’t have a firm idea of the financial future you want for yourself, then you aren’t going to be able to achieve it.
Building off the above point, the easiest way of achieving a long-term goal once it’s set is to create a plan with concrete steps to achieve it. For example, if you want to have 80k in retirement by the age of 40, rather than having some fuzzy idea to save money every month, it’s far more effective to divide that 80k into the remaining months before you turn 40, and commit to putting that number into your retirement savings at the end of each month.
Stopping yourself from buying things you want in the spur of the moment is an underrated skill when it comes to keeping your finances stable, but one that really should be ranked higher. A little impulse-control can go a long way.
While taking out a title loan or signing up for credit cards isn’t usually associated with financial stability, taking a line of credit or a loan are actually powerful tools to both bridge short-term financial challenges, and investment well in the long-term. Knowing when it’s appropriate to use a loan is a key financial habit to form for success.
Speaking of investing, an important habit of the rich and financially well off is that they never invest their money before doing research on what they’re investing in. Even just a minute of googling or cursory research can mean the difference between a profitable investment and one that’ll just drain your finances.
The reason most of us eat fast food is simple: it’s convenient and it’s a habit. But it’s also a habit worth breaking because while it may be cheap in the short term, in the long term it’ll play havoc with health. As the old saying goes, a lack of a cheeseburger a day keeps the mortician away.
As much as we like to think of ourselves as reasoned, deliberate beings, the truth is that a huge number of our decisions comes from the gut. And unfortunately, the gut doesn’t always make the best decisions or consider all the information at hand.
One of the keys to being financially stable is learning to think in the long-term instead of the short-term. Your finances are, after all, possibly the longest term project you’ll ever have to manage, and getting into the habit early of thinking long-term will be a huge help.
An important habit to cultivate alongside long-term thinking is to be detail focused. While it can be exhausting, focusing on financial details can prevent potentially catastrophic errors that can cost you thousands of dollars down the line.