It makes sense that we all have different goals based on what age we’re at and how much we want to accomplish. Some of us may want to go to private colleges; others might want to start a business or a family. Some of us want to retire when we hit 50, others after 65. Some of us want to travel the world, and others would like to remodel their homes and cocoon in it for a while. No matter what stage of life you’re in, money is an important factor in the decisions that you make and financial planning can help you have the resources you need to accomplish your goals. However, creating good financial habits can begin early so that you build on positive habits and reduce negative ones to create a lifestyle at any age that is good for your pocketbook and your ambitions.
Positive Financial Habits to Cultivate
When times are good, that’s the time to exert some discipline and cultivate the following good financial habits:
- Create emergency cushions – If you can put aside a little of your extra into a fund for when times are bad, it will help to stabilize the path you take in the future, no matter what happens.
- Reinvest some of your income – Use some of the income that you make in good times to create further value down the line. That might be savings for an education, or putting funds in an investment account.
- Live a little – Too much frugality can stifle the creativity in your life, so feel free to live a little when times are tough. As long as you realize that splurging every now and then isn’t a lifestyle, it’s a treat.
Bad Financial Habits to Avoid
- Spending everything you make – Many people decide that their lifestyles should match their income, instead of choosing to live beneath their means. If you choose to live life on edge, it makes it harder to recover when bad times hit.
- Accruing too much debt – Long-term debt can really hamper one’s ability to accomplish life goals. Even too much school debt can be a bad thing, if there is no guarantee that you will be able to afford it after you graduate. So, try to keep debt to short-term manageable terms, or at least, put towards investments like education or business that can give you a return for your money.
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I’m amazed at how many people I talk to that work really hard, make good money, and have no idea where it goes. They drive fancy cars, take big vacations, and charge a lot. It’s like they think they’re going to win the lottery tomorrow or something.