Money spending habits, good ones are important part of our lives and just like any habit, we can learn through practicing control of our spending habits. Below are 8 money tips that we should thrive to live by in order for us to take control of our spending habits:
1. Pay attention to Interest Rate
When you have loans, try to pay off the one with the highest interest rate. For savings, look for the one with the best/higher interest rate. Always check your interest rates both for savings and debt – compound interest rate can be your best friend (savings) and your foe (debt). Check out this formula for finding compound interest for savings.
2. Have a budget
Net Income is what you budget on! Not money you are expecting somewhere! Not money so-and-so promised you! And definitely, not your credit card! You don't budget on gross income thus the money your employer or business brings in before all your deductions such as taxes, retirement contributions.
Use the 50/20/30 rule to set up your budget – you divide your net income into three; 50% goes to housing, transportation, utility bills and groceries these are known as Essential Expenses; 20% goes to your debt payments, savings contribution, investments and retirement contributions (some employers deduct these contribution from their employees' gross salaries) these are called your Financial Priorities and finally, 30% of your net income should go to your Lifestyle Choices, these includes personal care, restaurant, internet, entertainment, gym membership fees, shopping and other miscellaneous and discretionary expenses.
3. Treat your money as part of you – set specific financial goals
“I want to pay off my credit card loans this year.” This statement is just silence; it doesn't push you to do anything. Now let's look at this statement, “By the end of July this year, I want to pay $250 towards my ZXY bank credit card and by September this year, I want to pay off the $100 of my Shop-by-Choix clothes credit card.” The second statement is clear and compiles you to do something. You can divide the $250 by the months left to get to July and set how much you will have to pay on monthly basis in order for you to hit your goal, the same applies for the $100 debt.
4. Love yourself and be appreciative
Appreciate the things that you have first and do not set your life based on others not even your friend because we all walk different financial paths. Acquiring more materials will NOT make you happy – the more you get the more you want.
5. Avoid Co-signing a Loan
If the bank asks for the borrower to have a co-signer then it means the bank does not trust the borrower to fulfill their payments and so shouldn't you. Co-signing for your friends or family members can affect your credit score if they fail to pay their installments and the bank can come after you.
6. Rethink what your money can do for you – Invest in stock market
One of the reasons why people don't invest is because they believe that they cannot afford to invest in stocks with little money and that it is just waste of time but when you start with the little that you have, you in fact taking a big step towards building your wealth. Nearly anyone afford to start investing in stock – when they learn to be disciplined with their money. The risk of failing to invest now is loss of time and loss of time means losing out on wealth growth!
7. Your income raise should sponsor your savings and investments
Getting a raise does not mean bigger spending habit automation – rather than spending more, use your raise to grow your investments and savings.
8. Apply for your local supermarket reward card
If your local supermarket offers loyalty program then sign up as this can help you in saving on groceries through rewards they offer for your purchase or even buying at cheaper price than the non-card shopper. Just make sure that they prices that they sell the products at either equal or lower than other local shops otherwise the loyalty card will not be worth it – the whole point to get the card to work for you.