Sound personal finance is all about habits. The no impulse habit, earn extra habit, no procrastination habit, and to crown it all, the discipline habit. While some people have successfully managed to stick to their ‘save more’ and ‘settle debts’ resolutions, some broke them the moment January set in. Only when you turn away from old habits do you realize the true benefits of savings.
Remember that ‘bad habits are like a comfortable bed, easy to get into but hard to get out of.’
Here are some ugly habits that we can work on dropping this January, to set pace for healing our personal finances the whole year.
1. Daily Lunch Spends
While it may be convenient to spend money daily on lunch, it is certainly not convenient to your wallet. This is one of the major cripplers of personal finance under what economist Thorstein Veblen would call conspicuous consumption. In conspicuous consumption people try to keep up with a certain class in terms of the material lifestyle like cars, restaurants, outfit and residences.
Consider carrying packed lunch which not only saves you some substantial amounts but is also nutritionally beneficial in what lacks in most eat-out meals. In addition, it is a good way to enhance your planning discipline. However, an occasional pop into a fine dine or coffee house, to hang out is quite in order.
Alternatively, if you have to, plan your lunch money ahead of time, this way you will not have to spend without the budget.
2. Piling Debt
When you find that you always want to spend what you haven’t earned, it’s a cinch you are on the pathway to debt addiction. Those that have broken this cycle have had to sacrifice one thing or another.
For instance, work on paying off that credit card loan without getting another one or accelerate your debt repayment using such extras as bonuses, tax refunds, gifts, or dividends to reduce the interest due to them.
3. Manual payment and savings plan
This is another term for making payments or savings just when you feel like it. An automatic payment system especially for regular bills, allows you time to focus on other more important matters.
If after payments and savings deductions, you realize that the balance is hardly enough for your needs, then its time you got yourself another source of income to suffice. Otherwise, all you will need is a regular check just to ensure things are going as planned. Think along the lines of a standing order to your account towards investment contributions, a trusted chama contribution, or bill settlement.
4. Not negotiating
For every purchase, save for the fixed prices in the supermarkets, there is always room for negotiation. Negotiation is not limited to the market place; you need it for that salary for your new job, promotion for your existing job, or business contract. Others even negotiate the rent they pay and it helps. After all every penny saved is every penny gained.
5. Generic goals
Generic goals don’t define specifics. For instance if your resolution reads ‘save for a house’, you are clearly trapped in discipline escapism. Why not have a specific goal that can align to some sort of discipline to achieve your goal.
For instance, ‘save Ksh 50,000 monthly towards buying a plot you have already identified in a specific year you have intended is a specific goal.
Personal finance ills like impulse spending, not investing, and fixing every other problem with cash may not have been mentioned in the above list but are certainly challenges that have been pointed out over and over which definitely need fixing.
Good habits are not developed overnight, a step a day and soon you will be where you want to be. Take charge of your personal finance and experience the freedom that only the rich can explain.