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Your Financial Takeover Starts Here
My husband and I met in 2018 and married 3 years later. We were so excited to start our lives together. But it was not until a few years ago that we realized we needed to make serious financial moves if we wanted to buy a home, retire early, have children, and continue to go on our adventurous vacations.
I was always big on the idea of investing and saving but my actions said otherwise. There was a disconnect between what I knew was right and how I was managing our money.
As the appointed “Treasurer” between my husband and I, I would put money away into our savings every month but found that I would have to take money out of our “growing” savings to pay for our credit card bills.
It did not make any sense to me that two postgraduate-educated healthcare professionals could not seem to grow their savings past $10,000. In fact, it always averaged around $5,000.
I was perplexed seeing everyone around us make major financial moves. People were buying homes, going on vacations multiple times a year and we were barely able to make put a dent in our savings account. Well, then how in the world could we accomplish any of our other goals?
I was worried about our financial future. I simply lacked some of the powerful habits listed below.
Thanks to serious motivation, we were able to implement these 11 habits that multiplied our savings and took us from $10,000 to $50,000 in one year.
Here are Our New Habits that Leave Us With More Money!
# 1. Goals
I thought to myself, how do I know how much I need to set aside if I don’t have a financial goals to reach towards?
This requires easy planning. Just sit down (with your partner) with a pen and paper at hand and jot down your plans for the next 6 months, year, 5 years, 10 years, and into retirement.
You can but don’t have to get majorly detailed with it. You just need to have something measurable to work towards. Work towards paying down debt, towards building that emergency fund, towards boosting up your retirement account.
Set up deadlines to achieve these goals. The challenge of achieving these goals helps to keep you on track.
A short story, I set my cousin up on savings goals throughout 2023. We had a lot of fun going back and forth whenever she updated me or I’d check in on her. I can tell that although it was a challenge on her end, she liked the accountability I provided. Since she understands the life-changing importance of this challenge, she sticks to it. She absolutely loves decorating her apartment with items from Home Goods or The Christmas Tree Shop. She certainly has a knack for interior design, but she spent a lot of money on these biweekly trips to the store. Fast forward to 2024, she is now 5 months away from paying down her student loans, managed to reach her savings goal for 2023 and continues to add to it in 2024. Just a short year ago, my cousin did not have any of this planned out. What a major financial takeover on her part.
# 2. Budget
I love talking about budgeting, I know many people do not. That’s fine. Budgets can be easy to follow though, and not as complicated as the ones we see out there with their fancy pie charts and diagrams. (Admittedly, I’m of the sort that drools at the site of a colorful pie chart.)
Knowing how much you make and where your money is going is crucial to having more control over your finances. I call this Knowing Your Numbers!
If you want a much easier option to help you budget, read ‘The ‘Goal Focused Budget’: The Easiest Budget Method You’ll Ever Need’.
Imagine not having to live paycheck to paycheck! Doesn’t that sound like a huge breath of relief you yearn to experience?
You can save a lot of money which adds up. Hundreds of dollars in savings a month equates to thousands a year that could go towards reaching one or more of your financial goals.
As the Treasurer in our home, I found that one month we had $3000 worth of credit card bills that were unplanned expenses. It did not include groceries or other fixed expenses for that month.
Concerned that we were not in better control of where our money was going, I shared this with my husband. However, I was initially hesitant to avoid coming off as though I was restricting him from enjoying his truly hard-earned money.
Thankfully, I have the most loving and practical husband in the world because he expressed that he really liked the idea of budgeting. He thought it provided good character building to practice self-control and avoid making purchases haphazardly.
I thought that was a great perspective on budgeting and tightening up spending.
That $3000 could have been used to put us on a faster track to reaching our savings goal, for example. And maybe that’s how you can look at it too when you set off on this journey.
# 3. Track Your Money
Tracking your money means you are aware of exactly how much money is coming in and where your money ends up and WHY.
The “why” is just as important as the “where”. The reason is because a lot of the time we find ourselves paying for things such as subscriptions that might not benefit us or maybe we don’t use it often enough to justify paying for it.
If I plan to pay for something, I ask myself “why do I need this item or expense?” That helps me decide whether or not it’s a “worth it” cost.
You can make this a weekly habit where you log on to your bank account and review the charges you made in the past week. What does it add up to? Was it more than you expected? Do you have enough left to pay your bills? Is there enough left to reach your financial goals?
I can’t begin to tell you about the ridiculous spending choices I’ve made in the past. The irresponsible decision to spend so carelessly stemmed from avoiding the hard truth; spending willy-nilly could get me in trouble.
You work hard for your money, sometimes you’re not even compensated as well as you deserve so every dollar matters. The more you track your expenses, the sooner it turns into an everyday practice. You’ll even find that you make wiser decisions in the moment and think twice before you take the cash out of your wallet or swipe your credit card.
# 4. Avoid High-Interest Credit Card Debt
Please try and do this at all costs. High-interest debt that is not paid off or where only the minimum payment is being made can be a harsh detriment to your financial independence journey.
There should be an immediate plan for paying your credit cards before the statement period is over. Imagine paying $1000 for a phone using your credit card. If you wait to pay it off and only pay down the minimum payment every month at a 20% APR, then the actual total cost of the phone comes out to about $1700. Oh, and it would take 7 years to pay it off.
I get it, sometimes unpredictable emergency purchases are necessary but that is the point of having an Emergency Fund. We’ll touch on that below.
Credit cards can have monetary advantages ONLY IF you use them properly. I suggest until you get better control over your spending, to use cash to make purchases. You examine your purchase more closely when paying with cash, as it is very easy to swipe a card.
Don’t you worry or feel bad, you will get to a point where you benefit from the advantages credit cards offer like travel perks, cash-back offers, and more. This is the Financial Takeover after all.
# 5. Education
This is what I love to do and what I love to share with all my readers. Educating yourself (which is what you’re doing now reading my blog posts), is a necessity to get yourself on the right track to financial prudence.
Learning financial terms and getting comfortable with reading financial literature without fully understanding everything at first, is a key step. The more you read, the greater your understanding and familiarity becomes.
Build your confidence by educating yourself because this will translate to action. You do not have to know it all to take action and start making changes to your current financial habits.
# 6. High-Yield Savings Account
On average, most brick-and-mortar banks give you a 0.01%-0.06% interest rate on your savings annually. That means if you have $5000 in a savings account, without making any additional deposits or withdrawals over a 10-year period, you would earn a whopping $5! (Insert eye-roll emoji here).
I am all about making my money work for me. I have worked for my money since I was 15 years old and for a long time did not have much to show for it.
I recommend parking the money you are not investing but maybe saving for a home, a car, or any other purchases into a high-yield savings account.
High-yield savings accounts out there are giving anywhere between 1%-5.5% interest rate annually, depending on which you choose.
That same $5000 in the example above, placed in a high-yield savings account that offers a 4% interest rate yearly, would yield $7401! Now isn’t that more of an appealing option?
Believe in Yourself, You Can Reach Your Financial Goals. Just Keep Reading!
# 7. Emergency Fund
To ensure you don’t pull emergency money out of your savings or investments and to avoid taking out loans or using your credit card to make emergency purchases, you should have an emergency fund for unpredictable costs.
We had a global pandemic just a few short years ago that proved life to be unpredictable. You’ll want an emergency fund that includes 3-6 months’ worth of expenses along with extra funds for short-term emergencies, i.e. hospital bills, car or home repair.
Emergency funds are important to establish to allow for your other funds and investments to grow without the risk of needing to withdraw from them.
# 8. Sinking Funds
I recently implemented this habit into our household and I am so glad I did. This is a fund for the expenses that don’t happen as frequently as your monthly expenses but still need to be accounted for, i.e. Vacations, Holidays, Birthdays, etc.
In the past, I would always get anxious around the end of the summer as all of my siblings’ birthdays were just weeks apart between the 3 of them. I was never prepared financially and would not get to enjoy the anticipation of celebrating as I was overwhelmed with stress.
It was similar around the holidays, from gift-giving costs and the increase in our grocery bill as we would indulge in specific holiday meals and treats. I always felt like we were spending more than we had available.
I came to realize I was going in “blind” when shopping because not having a set amount allocated for the holidays left me susceptible to extra spending.
To prepare for this, gauge how much you typically spend on these specific events and divide that by 12 months. Take that monthly amount and stow it away where you feel comfortable. Accounting for these costs ahead of time will leave you feeling like a champion and anxiety-free ready to enjoy all the celebrations.
# 9. Pay Yourself First
This is the biggest habit to set for reaching your goals.
Simply, after receiving your paycheck you immediately allocate part of your income to your savings and investment goals FIRST. The amount you allocate is based on the goals you previously listed and the dollar amount it will take monthly to get there in a specific timeframe.
Then the rest goes towards your expenses whether it be bills or other costs. That’s right, here you are prioritizing yourself. You are telling yourself that you and your future self matter!
Your financial health is a critical aspect of your life. Maintaining poor financial habits can affect you mentally, emotionally and physically. Working towards reaching a better financial state will translate positively into other areas of life.
The real key here is to consider making lifestyle adjustments to fulfill your goals. When you start allocating money to your goals as a priority, you will find yourself dedicated to finding more ways to save money on your expenses to get on the fast track to financial independence.
# 10. Be Cautious of Lifestyle Inflation
I’m a big believer in enjoying the “now” and not being super restrictive with yourself. However, there should be a realistic approach to this. You have to be practical with the current situation you are in and work with what you have. There are many alternatives to having fun that are less costly.
Lifestyle inflation occurs when you start to implement a certain lifestyle that includes pricey things or habits, that if you were honest with yourself you realize you don’t actually need or able to afford without going into debt. Those pricey things then eat away at your future financial independence journey.
I am not just talking about savings now for retirement many years later. You can make better choices now for the short term future as well.
As I said, enjoy yourself in this life. But don’t get carried away because things truly add up QUICKLY!
Budget and plan for the things you really want. Even before you do that, really think about how important that “thing” is for you before you spend your hard-earned money on it. Will this be an expense that give you short term gratification?
A lot of the time when someone’s income increases, rather than make use of the extra money to reach their financial goals sooner, they just buy more stuff, a fancier car, splurge on expensive dinners or designer clothing and accessories.
Guess what that does, it puts you right back to where you were before your income increased. That extra money is going towards items that might give you momentary excitement but leave you with bigger bills.
To be able to pay yourself first, you need to look at your expenses and get rid of the unnecessary frills that do not add value and only slow down your savings and investment growth.
Restricting yourself (especially temporarily) is not a bad thing when it is necessary, it helps build character and discipline.
# 11. Review Your Finances
Routinely checking your finances will keep you on track with your goals and maybe even get you there quicker when you make certain tweaks as necessary.
My husband and I take one day out of the month to keep each other up to speed and review our finances. Here we uncover whether we are staying on track and if changes need to be made in our approach.
Here is what we analyze:
- We review and reevaluate our Goals
- Double-check our expenses and even check to see if we can further reduce any costs.
- Review our budget and ensure it is in line with our goals
- Discuss any new and upcoming or unaccounted-for payments or events that need to be allocated into our budget
- We check the status of all our funds: Investments, Retirement, Savings, Emergency Fund, etc.
- Analyze our investments to see if any modifications need to be made.
- Lastly, we share any ideas i.e. passive income, to reach financial independence sooner
Here you have it, 11 Habits of People Who Are Never Broke
Stick to these 11 Habits and you will be in a much more relaxed state of mind financially.
I will help you learn the tools you need to make better financial decisions, improve your money-management skills, and get you on the path to retiring early and enjoying financial independence.
I care to make this a fun journey rather than a restrictive one but that takes being mindful, practical, and intentional with your financial habits.
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Until next time,
The Financial Takeover
