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By Zach Buchenau
Last Updated: June 28, 2023
Managing your finances effectively is a valuable skill that impacts every aspect of your life. Financially savvy people understand that attaining a secure financial future requires consistent effort, discipline, and continuous self-improvement.
In this article, we will explore seven powerful habits that financially successful individuals have cultivated by examining their mindset, strategies, and decision-making processes.
Delaying Short-Term Gratification In Service Of A Greater Long-Term Purpose
Financially savvy people know the importance of delaying short-term gratification in favor of a more rewarding long-term goal.
By practicing self-control, you can make significant progress towards a financially secure future.
One essential habit to develop is setting personally-inspiring long-term financial goals. When you have a clear vision of what you want to achieve–and a burning desire to achieve it–it’s easier to resist the temptation to spend on non-essential items.
To help with this approach, create a list of your short-term, mid-term, and long-term financial priorities and revisit it regularly to stay focused.
Another valuable habit is to distinguish between your wants and needs.
This makes it easier for you to determine which expenses are crucial and which can be reduced or eliminated.
For example, a need may be the monthly mortgage payment, whereas a want might be a new pair of shoes. By identifying and prioritizing your needs, you can allocate your resources more effectively.
Practicing mindful spending is also vital for delaying short-term gratification. Before making a purchase, take a moment to evaluate the reasons behind it.
Are you shopping out of boredom or stress?
Is it an impulse buy?
By understanding your spending triggers, you can curb those urges and make better financial choices in the long run.
By embracing habits that delay short-term gratification in service of a long-term purpose, you’ll almost certainly make faster progress toward your biggest, most inspiring goals.
Saving Before Spending
One powerful habit of financially savvy people is prioritizing saving before spending. This, in my opinion, is one of the key habits necessary for achieving financial success.
To achieve this, start by creating a budget to track your income and expenses. List down your sources of income and your essential expenses, such as housing, utilities, and groceries.
Then, determine a percentage of your income that you want to save on a regular basis, and move that percentage of every paycheck you earn into your savings account the moment you receive it.
A good rule of thumb is to aim for a 20% savings rate, but you may need to start smaller when you’re just getting started.
Saying ‘No’ To “Net Worth Reducers”
If you want to increase your net worth, one of the easiest things you can do is reduce the number of net worth reducers in your financial life.
Net worth reducers are expenses, debt, or lifestyle choices that decrease your overall net worth.
These can include costly habits, credit card debt, personal loans, student loans, and impulsive purchasing behavior. By identifying and eliminating these reducers from your financial life, you’ll be one step closer to achieving financial success.
To start cutting back on net worth reducers, examine your current spending habits. Are there any unnecessary expenses that are draining your finances? Common examples include dining out frequently, excessive shopping, or having an expensive daily coffee habit.
I know…how dare I say anything about your daily coffee run!
By cutting back on these activities, you can immediately increase your savings and, in turn, your net worth.
When it comes to debt, the less of it you have, the easier your life will be–especially when it comes to high interest debt like credit cards and personal loans.
So, make it a priority to pay these off as quickly as possible, and do your best to avoid taking on new debt.