If your finances are bearing down on your shoulders, now’s the time to take control. Here are 7 habits that will transform your finances in 2024, so that you can enjoy all that healthy money management brings.
We’re at that time of year again. A time of reflection, worry, and resolutions. You’ve put on a few pounds, and you’re taking stock of your health.
Your bank balance is lower than you’d like, and your credit card bill is higher. You’ve overindulged, under-exercised, and overspent.
There’s only one thing for it! Get out that pen and paper and make a list of New Year’s resolutions.
Not me, though. I hate New Year’s resolutions. They are too challenging to keep and too easy to break. I think it’s much more productive to develop good habits, especially where money management is concerned.
Why are you making New Year’s resolutions? Do you ever see them through?
It’s much more effective to build good habits than target resolutions, especially where finances and money management are concerned. With good financial habits, you’ll transform your money management and build real wealth for your future.
Here’s the challenge – can you be generous, honest, patient, flexible, thrifty, strategic, and innovative every day?
We think you can, and, in this article, we explain how.
7 Reasons Habit Building Crushes Resolution Making
A habit is something you do routinely. You don’t even think about it. It’s an automatic action or behaviour that you repeat in your daily life.
On the other hand, a resolution is a conscious decision you’ve made to do something. It’s focused on the outcome rather than the action – “I want to lose weight,” rather than “I’m going to eat healthily”.
Here are seven reasons why developing good habits is usually more effective than setting resolutions:
1. Automatic Action Vs Willpower
Once you have established a habit, it becomes part of what you do automatically. There is little conscious effort required to maintain a habit. In contrast, resolutions rely heavily on willpower – and the effort required can make this difficult to stick to.
2. Small And Consistent Vs Big Goals
A resolution is often a large goal, the size of which can be demoralising – you never seem to get closer, do you? A habit is usually a small action that is part of everyday life. It’s much easier to climb two flights of stairs every morning than work toward climbing Snowdon.
3. Easy to Integrate into Daily Routines
Because they are small, everyday actions, they are easy to integrate into your daily routine and easier to sustain. They don’t require the big change to your life that resolutions often require of you.
4. Immediate Satisfaction
Achieving big goals takes time. When you establish a habit, you’re a winner every day. That in itself is a great motivator.
5. Flexibility v Rigidity
As your life evolves, so, too, can your habits. As you become fitter, instead of walking to the bus stop, you can switch things up and walk to the train station.
Resolutions are more rigid in their nature, and this means they are much more challenging to adapt to changing circumstances.
6. It’s About Process, Not Outcome
A resolution focuses on the outcome you desire. Habits focus on the process – and actions speak louder than words! When you act regularly, sustainable change becomes more likely.
7. Less Sense of Failure
An occasional lapse in a habit can be forgiven. It’s just part of the process of forming a habit. Break a resolution, and it feels like you have failed. The result – you abandon the goal.
7 Ways Good Financial Habits Will Change Your Life
Good habits are life-changing. The habit of walking for an hour a day helps to improve your circulation, strengthen your muscles, breathe more easily, lower your heart rate, and maintain a healthy weight.
Instil good financial habits into your life, and over time you’ll find your financial wellbeing reacts equally positively.
Here are seven key benefits you can expect to experience because of a positive approach to your finances:
1. Reduced Financial Stress
When you manage your money effectively, you’ll be less stressed by debt, unexpected financial emergencies, and financial uncertainty. Less financial stress equals better mental and emotional wellbeing, too.
2. Enhanced Financial Security
Good money management leads to a better and more productive attitude to saving and investing. You’ll have money behind you – and that makes facing life’s ups and downs (the loss of your job, health issues, or other unforeseen circumstances) much easier to cope with.
3. Greater Freedom and Flexibility
As you build your wealth, those financial handcuffs become loosened. The world you desire opens up to you. Money is no longer such a constraint on travel, hobbies, or doing the work you desire most.
4. Improved Decision Making
Less stress and better finances mean you are more able to make better decisions about your time and money.
5. Increased Savings and Wealth Accumulation
Good financial habits can lead to significant wealth accumulation over time. You’ll have a financial cushion for emergencies, and the finances to make larger purchases without going into debt.
6. Better Retirement Planning
Fewer money worries and better finances allow you to focus financial planning in the longer term – your retirement has never looked so rosy!
7. Enrich Your Own Life by Supporting Others
Good financial habits, and the financial transformation that comes because of them, enable you to support others. This may be friends or family. It could be charitable causes that you hold close to your heart.
7 Great Financial Habits to Practice Every Day
So, if you crash and burn with New Year’s resolutions, what habits will help you become a better money manager? What daily routines will help you to take a different view of money and, over time, lead to less financial stress and a wealthier future?
Here are my top seven financial habits, with examples.
1. Be Generous
It’s good to be good! It also doesn’t have to cost you a penny, though I have paid for other people’s shopping, bought a stranger a cream cake, and so on.
An example of a non-financial way to be generous? When we share our experiences to help others, we’re being generous.
Generosity helps to develop a more positive relationship with money. It reinforces that you do have enough money to share and enjoy. Generosity should also extend to yourself.
How can you be more generous? Set aside a small amount each month to donate to charity, and a small amount for personal treats – reward yourself for sticking to good financial habits. This doesn’t need to be a large amount. How about starting with just 1% of your salary?
2. Be Honest
I had a friend who was in terrible financial trouble. His debts were mounting up, and each month the hole he had dug for himself was getting bigger.
The first thing he needed to do was acknowledge his money issues. Instead, his way of dealing with them was to file away his final demands and red-ink bank statements in a box at the back of his wardrobe. Out of sight, out of mind.
When you wake up to the reality of your finances,and get honest about them, you can move forward with a realistic budget plan.
A tip here is to keep your income and spending under review. Now, I know how challenging this can be. Which is why I love budgeting apps like Chip or Plum – they eliminate the hard work of keeping track of your finances, and include tools that help you to spend more wisely and save more easily.
Remember, by acknowledging your impulsive spending habits or areas where you can cut back, you are giving yourself the power to make small changes that will lead to big differences.
3. Be Patient
Patience is definitely a virtue when it comes to money management and financial planning. It helps you to make better long-term decisions for your money, and can save you money in the short term, too.
Making impulsive purchases is never a good decision. It’s best to go away, think about it, and then, if you are certain the purchase will enrich your quality of life or make a difference in some positive way, only then should you go ahead.
The 30-day rule is a good one to put into play. This is simply allowing yourself 30 days to consider a big purchase or impulse buy before going ahead. Another money saver is to be patient and wait for a sale. Don’t forget, too, that you can always shop around from the comfort of your own home.
Finally, if you do give into temptation, put a limit on your impulse spending. The easy way to do this is to only spend from a designated account for impulse buys.
For example, a Monzo account allows you to set up savings pots that you could use for different spending or savings goals. (Something I love about this method is that as your pot grows, it becomes psychologically more difficult to withdraw money from it!)
4. Be Flexible
Life is never straightforward, is it? Just when you think you’re getting there, you get thrown a curveball. Your overtime gets cut. The car needs major repair. You have an unexpected medical bill. Your kids all need bigger shoes at the same time.
The trick to coping financially with life’s unpredictability is to remain flexible. Always be prepared to cut back on spending.
This is why you should review your finances regularly, and focus on developing and maintaining an emergency fund.
5. Be Thrifty
Being thrifty – or wiser with your money – can lead to significant savings over time. There are many ways to do this: using shopping vouchers, always presenting your supermarket loyalty cards, and waiting for the sales to buy that outfit you’ve had your eye on are examples.
You could also start to repair and refurbish items that you would otherwise replace. A barmaid I know started to do this, and found she enjoyed it so much that she has now set up a side hustle of repurposing old furniture.
One of the best ‘slow burn’ strategies for being thrifty is to get busy with the best cashback apps in the UK. These help you earn money back into your bank account when spending what you would usually spend with retailers.
6. Be Strategic
Unless you buy the lucky one in 45 million tickets that wins the lottery jackpot, you’ll need to be strategic to become a millionaire. You’ll need to find ways to make your money work for you, invest in yourself, and maybe set up a side hustle.
When you are strategic with your financial planning and use of money, you prepare for significant financial changes. Get going on this – set specific financial goals and create step-by-step plans to achieve them.
7. Be Innovative
If you do the same thing over and over, how can you expect different results? What you need to do is find new ways to increase your income, as well as reduce your expenses. There has never been a better time to be innovative with your financial planning and everyday money management.
Innovation in your approach to finances can lead to additional income streams, more effective budgeting, and better financial planning. However, you’ll need to keep abreast of new financial tools and opportunities.
2024 could genuinely be your year for getting your finances in order once and for all, freeing yourself to enjoy life without the burden of money worries. I hope these tips have helped.
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