Financial Planning: How to overcome poor financial habits

All of us are guilty of having at least one bad money habit. It might be something as simple as indulging in a sudden shopping spree or over spending at a restaurant. Though these habits seem harmless in the beginning, it can wreck your financial goals over a period of time. Your money management skills or the lack of it is the single most reason to become rich or poor. Many of us are born spenders, impulsive purchases can lead to financial trouble. Big spenders do not even realise the amount they spend until considerable time has passed and they are left with huge bills.

The flag off point in the journey to be rich is to be prudent with your spending. Here are simple ways to get away from poor financial habits

Set limits or budgets: Spending or comfortable living can be guilt free, stress free and debt free if one sets an internal limit on the amount they have to allocate for particular expenses. Usually not having a limit or budgets makes one go overboard and only in hindsight it looks ballooned. Therefore knowing beforehand the amount of monies to allocate and spend for your requirements within a limit is prudent.

Track your spending habits: This is an important step towards moving away from bad money habits. Begin by making a list of all your expenses. Classify your expenses into needs and wants. Needs are those expenses that are a necessity, whereas wants are those items that are desired by an individual. Cut down on your expenses by carefully doing away with wants that can be planned for later. Create a list of priorities and allocate funds to satisfy the most important needs and wants. This evaluation will help you maintain a balance.

Cut back on daily spends: Do you have a subscription or a gym membership that you never use? Make a list of all your subscription services for which you have registered. Track the number of times you have made use of those services and the money it costs you. Cancel those subscriptions that you rarely use. Do you eat out everyday? Dining out or ordering in can be huge time saver but it comes with its costs. Try to make home cooked meals at least twice a week to save money on food.

Make yourself accountable: A bad financial habit, like any other, is a behaviour that is learnt over time. If you are constantly on a shopping spree or if you experience chronic debt problems, it’s simply because you have made it a habit. Be aware about your unhealthy money habits. Drop them to get a grip on your money. Here are a few ways to make yourself accountable:

Create a budget that will help you effectively allocate your money. Be aware about how much you can afford to spend. You definitely cannot spend more than you earn. Allocate at least 10% of you salary on savings.Choose a financial accountability partner who can help you work towards your financial goals. Ask your close friends or family members to keep a track of your spending habits. Just as you go to a doctor for medical advice and a lawyer for a legal advice, get in touch with a financial advisor who can help you pave an easy path for financial security.Start saving from the day you start earning. Many of us have the tendency to push money planning to another day or postpone it till the last minute, simply because we have something else to do or we don’t understand it. If only we can avoid the one day syndrome and opt for financial planning from day one, you are sure to get a grip of your money matters.