Going bankrupt is something no one would ever want to experience. According to a recent study, more than 1.5 million people go broke every year. The worst thing, however, is that this number is on the increasing side, which is alarming. Reasons for poor financial stability can include bad spending habits, poor wealth management, job loss, and divorce to name a few.
Many studies have shown that poor money management often leads people to this situation. This can be easily averted by following some superior money habits. Want to know about them? If yes, then follow up as we share our list of money habits of people who never go broke.
1. The habit of setting goals
Building wealth is not something that can be done overnight. You would have set particular goals for particular milestones. Following them is even more important. Anyone with good money habits knows that how important it is to set goals.
You can start with setting goals like paying off debt on time, always having an emergency fund in place, and then go above and beyond once you’ve reached them. Setting such goals will make you more accountable for your money and ensure financial stability over time.
Some benefits of financial goal setting include:
- It strengthens your decision making
- It creates a sense of self-evaluation within you
- It helps you focus on your priorities
- It improves your mindset regarding money
- It increases your chances of success
2. The habit of saving money
The habit of saving money is an important one. It plays a vital role in your long-term financial condition. If you’re able to make saving money your habit, you’ll always have a backup in case of an unexpected financial emergency.
Aside from that, saving money will help you become wealthier, achieve your financial goals, and most importantly, it’ll abolish any chances of you going broke.
Follow these tips to start saving money now:
- Track your expenditures and look out for improvements
- Avoid spending a big amount of money at once
- Consider using gift coupons, cash back apps, and royalty cards in your everyday purchases
- Look out for sales and discount offers
What can you achieve with saving?
- Financial stability
- Financial independence
- Preparation for unforeseen expenses
- Elimination of bankruptcy
3. The habit of budgeting
The habit of budgeting can be considered the foundation of all good financial habits. Creating a budget and following it can make a significant change in your financial condition. One of the major reasons for financial issues lies in one’s inability to track their spending.
A solid budget plan will help you to not spend beyond your means and will keep you in line. Without a budget, you may occasionally fall into monetary troubles.
Start budgeting now by following these budget management methods:
- Pay yourself first model
- 50/30/20 model
- Zero-based budgeting strategy
- Activity-based budgeting
- Incremental budgeting
If you are not sure about budgeting, you can use an app like Truebill to automate your budgeting.
Related article: 5 Budgeting Techniques You Can Use to Start Creating Wealth
4. The habit of investing
Just don’t let your spare money sit around without making any profit. Let it work for you by investing it. If you make some authentic investments, going broke is practically impossible, as there always be a possibility of getting sizeable returns and profits.
Consider creating a personal investment portfolio to increase your income. Constructing an investment portfolio can also help you build long-term wealth.
Here are some good investment ideas for novices:
- Mutual funds
- Compound interests
- Bank deposits
- Fractional stocks
- Exchange-traded funds
- Retirement plans
- Investment-based personal finance apps
If you are inexperienced in investing, you can also get some technical assistance with the help of Robo Advisors. Here, you just have to specify your investment rules and risk appetite. Check out the Titan Robo Advisor to automate your investments. Your investment will be automated, and you can save a lot of time too.
You can also get great stock recommendations from Motley Fool’s Everlasting Stocks and use the information to grow your wealth.
5. The habit of living below your means
If you want to gain control over your finances, then you must stop living way beyond your means. In today’s world of Instagram reels and tik tok videos, people love flexing the things they own. Be it luxury items or expensive vacations, doing it just for the purpose of showing off will certainly come back to bite you one day.
If you truly wish to show off, you need to spend some time and earn the required money first. When you have enough money for everything, you can start enjoying life without any guilt (or a huge credit card debt).
You would have to alter your lifestyle in a way that doesn’t require you to squander all the hard-earned money. You would have to be more cautious with your budgeting or else, you’ll end up losing all and gaining nothing in the process.
Start living below your means by following these tips:
- Create a budget that focuses on your needs more than your wants
- Stop buying unnecessary things that have no meaningful means
- Negotiate rates and bills
- Don’t rely on credit cards
6. The habit of banishing debt
Once you fell into a debt trap, getting out can be quite difficult. Poor debt management can devour a major part of your income. And if gets out of control, then you may end up in a ferocious debt yap. This is why you see many poor people struggling to get out of debt once they end up acquiring it.
Overwhelming debt can also make individuals go bankrupt. If you wish to get your life back on track, you need to settle all your debts first. It may not be possible overnight. However, with proper financial discipline, you can overcome debt and lead a healthy financial life.
Follow the below tips and take some notes for better debt management:
- Track all your bills and pay them on time
- Always have an emergency fund or fixed deposit for backup
- Have a budget plan in place
- Avoid using credit cards for everyday purchases
- Avoid borrowing money for frivolous expenses
Financial stability for better life
So, these are some money habits you can bear on for better financial stability. The key here is consistency. When you make these habits a part of your everyday life, you will lead a better financial life than most others.
Just follow all these habits without fail for just 3 months. You will start seeing results. This will motivate you to go even further. In the end, you’ll have better control over your money. We truly hope you achieve all your financial goals.
Don’t forget to download our FREE personal finance toolkit that can help you identify the best tools you can use to manage your wealth!