Financial success looks different for everyone. Even as you work towards career growth and boosting your earnings, it’s important to focus on managing your personal finances and making the most of what you have. Here are 7 practices that have worked well for me:
Prepare for contingencies
Prioritize having a safety net that you can fall back on. Create an emergency fund that can cover unexpected expenses and contingencies, so that you don’t have to dip into long-term savings to tide you over. Typically, this should be 6 months to a year of your expenses.
Don’t invest in what you don’t understand
Investing can be rife with jargon, but you should be able to understand the structure and nature of investment well before buying in. If any information lacks transparency, it’s best to avoid it. Ignore your fear of missing out on the next big Reddit investment fad, and stick to what you can comprehend and navigate. Consider working with a proven financial adviser.
Shake negative feelings about money
Whether it is associating financial ambitions with greed or frugality with being a penny-pincher, it’s important to let go of negative associations with money. Making, spending, saving, and investing money make up a significant part of our every day. Building a healthy outlook towards money will make all the difference when it comes to achieving your life goals, whether it’s supporting family, buying a home, pursuing higher education, or just taking adventure trips.
Don’t get tied down by fixed assets
Some dated notions about owning assets like a home or a car being the most significant investment you can make, need to be done away with. Tying yourself down to a location because you bought a house or committing to service a hefty loan over the long term is not practical. Sometimes renting might be the better option to be able to make the most of opportunities and experiences. Or, you can buy in one place if you must build a fixed asset but still choose to live where you wish to, given a lot of professionals have multiple options today.
Let go of bad investments
All of us make bad investments, whether it is a promising share that went downhill or a physical asset we never ended up utilising. The sunk cost fallacy might compel you to hold on to investments that are tanking, but this is likely to end in more losses. Learn when to cut your losses and move on otherwise a bad investment will limit your future potential.
Create multiple streams of income
Having multiple streams of income is crucial to building wealth over the long term. Ensure that alternative income sources are set up in a way that continues to make money for you, even without your intervention. This could be through a variety of investments, from mutual funds to rental properties.
Make a commitment to giving
Once you’ve secured your own finances, consider giving back a designated portion every year from your income. Whether it is through donations to organisations that are actively working on social justice and welfare initiatives, or investing the time and money required to tend to unprivileged individuals or the voiceless animals, find what works for you and follow through on your commitment every year even if your investment may have dipped one year. Putting continued empathy into action will result in keeping you grounded and making better choices for your financial freedom.
