12 Better Money Habits For A Prosperous New Year
The New Year is upon us!
Have you set some goals for the year? In your list of resolutions, be sure to include your finances as an area you'd like to improve this year.
With just a few tweaks in your habits, you can increase your income by thousands and set yourself up for future financial success.
Throughout my journey in personal development, I've learned about the power of successful habits and how stacking them over time can completely change your life. When it comes to your finances, it's no different.
The opposite is also true. Nearly 70 percent of lottery winners go broke within five years. That's a crazy fact, right?
They're stuck with the old habits they had before becoming wealthy. The aim is to avoid becoming one of those people — so we need to start applying ourselves now.
It's taken me a couple of years to change my finances through my own mistakes, as well as reading and learning from mentors. Before then, my spending habits were random, and I never made the most of the money I earned.
I have now changed my money habits and have a healthy amount of savings and a passive income stream from a variety of sources. I'm well on my way to buying my first home with enough left over to give away to causes I believe in.
None of this would have been possible if I didn't learn and adopt different money habits which I'd like to share with you.
Here are 12 better money habits for the New Year:
1. Pay yourself first.
This is a fundamental habit: you must pay yourself first before anyone else.
As soon as you get paid, funnel at least ten percent of your earnings into a savings account before using any of it. I mean what is the point of earning just to give it all away every month.
I first read about this in the book Rich Dad Poor Dad: What The Rich Teach Their Kids About Money That the Poor and Middle Class Do Not! by Robert Kiyosaki.
I thought that this is such an obvious thing that most people don't do, and yet they complain when their finances stay stagnant.
It may be difficult to do this at first, but the more you do it the easier it gets and will pay huge dividends for you later.
2. Track your spending.
You'll make better decisions if you understand how much you're earning and spending in detail.
Awareness is always key in any area you wish to improve on. Without knowing, it is impossible to work towards your financial goals.
Create a budget which will allow you to allocate your money towards different areas of your life like food, housing, lifestyle, savings and review it regularly to ensure your on track.
In this age, there are many clever apps that make it very easy to track your finances such as the Mint app, which can link all the accounts you have in one place.
3. Live below your means.
This means spending less money than you earn. This is what you must do for long-term financial growth.
Most people understand this concept but find it very difficult to implement, as their short- term desires blind them from what's really important in the long term.
This lack of vision is why many people end up living paycheck to paycheck or saddled with heavy debt and high-interest payments.
You need a budget and discipline to make sure you stick to this concept. It requires reducing any frivolous expenditure if need be.
You'll be able to enjoy your money far more as it grows, so the earlier you start implementing this the better off you will be.
4. Clear your debts.
Debt should be avoided as much as possible.
If you spend more than what you have in the bank, you will end up paying for it in the long term through high interest payments.
Having debt is a sure way to financial struggle. You will not be able to achieve any of your financial goals, as all that money will be going toward paying of debt.
If you have debt, make sure you formulate a plan to pay it off as soon as possible and stick to it. You can learn an excellent plan for paying off debt in Dave Ramsey's book, The Total Money Makeover: A Proven Plan for Financial Fitness
5. Start investing.
Investing your money wisely gives you the power to be financially free one day.
Look into stocks, real estate and bonds. The returns here will be a lot higher than leaving your money sitting in the bank.
The miracle of compound interest over time can provide a passive income large enough to make your life much more comfortable and provide a substantial retirement income if you invest wisely.
Many people are risk averse to investing, but you don't have to risk much. Even a $50 investment a month can lead to a solid income stream in the future. I believe the bigger risk is not even attempting to be financially free. Take a look at this investment calculator to see how much you could make by investing your money.
If you want to learn more about investing in stocks, check out the books A Random Walk down Wall Street: The Time-Tested Strategy for Successful Investing and The Essays of Warren Buffett: Lessons for Corporate America, Fourth Edition.
Interested in real estate investing? Check out Building Wealth One House at a Time, Updated and Expanded, Second Edition and The Book on Investing in Real Estate with No (and Low) Money Down: Real Life Strategies for Investing in Real Estate Using Other People's Money.
6. Start giving away a percentage of your money.
Many wealthy people tithe some of their money.
Giving to others keeps you in an abundance mindset, which will allow you to receive more. It also helps you become an active giver in other areas of life.
This habit has brought me a lot of joy, and I highly recommend you adopt it. Three to five percent of your income is a good amount to aim for.
7. Make it automatic.
Making automatic payments for your bills ensures you pay on time so you don’t have unnecessary late charges.
When set up correctly with your bank or other institutions, automatic payments allow the institution to pay your bills at the frequency you indicate, with no further action required on your part.
You can set up an automatic payment plan directly from your bank to various companies, or many creditors (like you home loan company or utility companies for example) have online account management systems that allow you to log in and schedule payments.
Rather than spending hours on bills and statements, you can save yourself a lot of hassle and time, giving you more time and energy to work on your other money habits.
8. Invest in yourself.
Knowledge is power, and the more you know, the more you can put to use about finance.
No one will ever care about your finances more than you do. Even if you hire a professional, it's your responsibility to know what's going on.
You can read about the habits of the rich or how to best invest your money, maximizing your earning potential. There are many great resources out there, like the books I previously mentioned.
Also, check out these highly useful personal finance blogs. Subscribe to a couple so you get regular information in your inbox.
When I started adding this habit into my weekly routine, I found out there was so much I didn't know that I could easily implement. Just a little more knowledge can mean a lot more money in your pocket.
9. Turn clutter into cash.
We all have things in our homes that we don't use anymore and are just collecting dust.
Those same items could be sold for a tidy sum with the added bonus of a more organized home.
You just need to be proactive and make it a habit to declutter every so often. During that process, if you haven't used or worn something in six months, get rid of it.
Some of the biggest offenders that you should look into are clothes, gadgets, toys, CDs, DVDs and books.
You have many options for getting the best value for your unnecessary clutter. Check out different online websites (like eBay and Craigslist) and local shops that take used goods. Better yet, organize your own yard sale, especially if you have bigger items to sell, like furniture or exercise equipment.
For more ideas on decluttering your home and selling your stuff, check out Barrie's book (with co-author Steve Scott) called 10-Minute Declutter: The Stress-Free Habit for Simplifying Your Home.
10. Cook at home more often.
Cooking at home saves you money and is much healthier for you.
So it's a great habit to form for your bank account and your general wellbeing.
Just buying lunch out, compared to packing your own, can cost over $2000 a year. Double that if you're eating out for dinner too. Yeesh.
That's a huge amount of money that you could spend on more important areas of your life.
When you cook at home, you know exactly what ingredients are being used so you can make sure it's fresh and healthy. Healthy eating habits tend to encourage other healthy habits, like developing a fitness routine.
People think that it saves time to eat out, but that's really a myth created in our minds out of laziness. It could take well over an hour by the time you've travel to the restaurant, order and wait for the food, eat it, and drive back home.
A well-cooked meal can take less than thirty minutes with proper planning, and you can even cook in bulk so your time per meal is even less.
Here are two great cookbooks to help you save money while still eating well: Jamie's Food Revolution: Rediscover How to Cook Simple, Delicious, Affordable Meals and Family Feasts for $75 a Week: A Penny-wise Mom Shares Her Recipe for Cutting Hundreds from Your Monthly Food Bill.
11. Do your research.
There's much to be said about doing your research before you buy anything. A few minutes of extra time spent doing this could save you a fortune in the long run.
There are many ways to save money if you just take your time to find them. Use comparison websites to find the best deals, discount coupons, and codes that will give you money off of your purchases.
Check out the Honey app that searches for coupons and discounts for you as you check out when you make an online purchase.
It's always worth a Google or even buying unwanted gift cards for a cut price and then spending them on what you need.
These days you can even track price drops so you know when an item is more affordable, saving you even more cash.
12. Find an accountability partner.
Changing habits isn't easy. Having an accountability partner will make all the money habits outlined in this article a lot easier to implement.
An accountability partner is someone who wants you to succeed and will help you every step of the way. They can get you back on track when you veer off. And of course, you can reciprocate by keeping your partner accountable to his or her goals.
The power behind accountability is that it gives you leverage on your goals. You always try harder and honor your promises when you know someone else is paying attention. You don't want to disappoint your partner or look like you're slacking with your habits.
So find someone as eager as you to change their financial habits and start working on one new habit each month so you're guaranteed a more prosperous New Year!
Amit Dhunnoo is a personal trainer, writer and speaker based in London, England. He is a contributor for the Huffington Post and the founder of Conscious Movement, a platform for helping others become the best version of themselves. Follow the movement on Facebook here.