3 Good Financial Habits to Adopt

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There?’s not much difference between successful people and unsuccessful people. People who have managed to live their financial lives to their maximum potential really aren?t that different from us. There was a famous book on millionaires, called ?The Millionaire Next Door.? According to the study, millionaires look like you and me.

What sets them apart however, are the small things that we should all emulate if we want to achieve some of their financial success. The bottom line is that good habits are what sets successful people apart from people who fail to live up to their fullest potential.

The good news is habits can be learned. You can adopt a habit. The old saying is that it only takes twenty-one days to adopt a new habit. Well, according to a recent study, it?s actually closer to sixty-six days. Regardless of how many days it takes to adopt a habit that will take your financial life and capability to the next level, it is well worth your effort and time.

Here are just three of some good financial habits you need to adopt so you can build up your savings. Why do you need savings? First of all, you need savings so you can weather any emergencies that might pop up. More importantly, you need a healthy amount of savings so you can invest your money. The worst thing that you can do is to leave your savings in the bank. Because of low interest rates and inflation, your money will rot away in the bank and eventually, the amount of money you have saved in the bank will not buy you much. This is how inflation reduces purchasing power over time. By necessity, you need to invest your money. But, you have to have money saved up for you to invest. See how all these works out.

Follow the habits below and you should be able to build up quite a bit of savings in no time.

Frozen spending week

Make it a habit to freeze all your spending every other week. This means that you set a budget, and you stick to that budget. You don’?t compromise. If you resolve to spend only fifty dollars for a particular week, spend within that budget.

This may be rough at first, but once you get the hang of it, it can easily turn into a habit and you won’?t think much about it. In fact, it can be quite fun because you can challenge yourself to live on less and less money with each passing week. You might change your shopping habits, you might change the places where you shop, you might even change the quantity that you buy. If anything, this habit will force you to become more efficient.

Buy higher quality items that last longer

Many people think that frugality and being cheap are one and the same. No, they are not. If you are cheap, you just hate spending money and you make your life miserable because money is the centre of your life and you don?t really enjoy your money. This is bad news. This is not anything that we advocate. Saving is one thing. Being cheap is another.

Frugality, on the other hand, is all about getting maximum value for the money that you spend. You don’?t mind spending money. You might even pay top dollar for an item. You just make sure that the item that you buy lasts longer, is of a higher quality, and produces a better experience for you. That is the difference between frugality and cheapness.

When you buy higher quality goods that last longer, you are being frugal; you are being smart with your money. This is very efficient. You get one hundred dollars? worth of value for an item that you buy at twenty dollars. Compare with a cheap person?s strategy which is to pay one dollar and get two dollars worth of value. See the difference? We?’re talking a massive rate of return. So focus on getting more for the stuff that you buy.

Minimizing expenses

When people think of minimizing expenses, they often think of the things that they’ lose. Rarely do they think about the things that they’?d gain. In fact, you gain a lot of things when you resolve to minimize your expenses. First of all, you gain the ability to prioritize and focus on what?s important. If you are really honest with yourself, you can quickly realize that most of the things that you spend money on any given week are stuff that you don?t really need. Minimizing expenses helps you prioritize your life.

Second, it helps you become a more efficient shopper. You are able to see economies of scale, economies of quality, and economies of scope. By using these different economies, you are able to get more value for every dollar that you spend than otherwise.

The third key element in terms of minimizing expenses involves problem solving. To many people sacrificing and saving are painful things. However, you can turn this into a fun little puzzle; a personal challenge that can draw out your creativity and could make for a great family problem solving exercise.

Learn the many ways you can save on your daily expenses. In fact, there are many websites that are devoted to saving strategies; involving everything from cosmetics, household goods, food. You name it. Turn saving on your expenses into a fun little project.

Anum Yoon

Anum Yoon is the founder and editor of Current on Currency. She loves all things personal finance, which is why you'll find her work all over the PF blogosphere. Catch her updates on Twitter @anumyoon!

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