13 money habits for your financial well-being

Take a moment to closely examine your account statement. Your spending habits are reflected there, revealing whether you have control over your finances. If you spot any issues, it's time to make some small changes in your spending habits.

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In today's digital age, where online shopping and smartphones have made the world easily accessible, impulse shopping has become a growing concern. Recent reports indicate an alarming 18% increase in impulsive purchases, particularly in 2020.

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However, you can make a positive change in your lifestyle by starting small and developing good money habits. By cultivating consistent and disciplined practices, you can achieve significant financial gains by the end of the year.

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‍For instance, instead of spending ₹500 per meal every weekday, plan your meals well ahead of time, perhaps during the weekends. So, when you have a plan in place, you will be less tempted to order impulsively.

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This simple adjustment could save you ₹1,30,000 annually. You could choose to invest this money further or maybe spend it on buying something or doing something you like. 

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If you are curious about how to break free from your bad spending habits and develop positive money habits, keep reading this article to learn more.

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Bad Money Habits That Put Dents In Your Budget

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As quoted “It's not how much money you make that makes you rich, it's how you spend it." - Charles Jaffe. Here are some bad money habits which you should avoid if you want to grow financially

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Impulse To Swipe Your Credit Card

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These magical plastic cards make it so easy to pay for those expensive heels you have been craving for so long! But stop. Would you have the money to pay that amount back next month? If you are unsure, you have your answer.

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Credit card companies charge high-interest rates if bills are not paid full on time and you develop an outstanding balance. By getting rid of this spending habit you save yourself from unnecessary debt and financial stress.

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Save up for desired purchases, make informed choices, and only use credit cards when you can pay off the balance promptly.

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Shopping When You're Bored Or Emotional

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If you find yourself spending money when you are bored or emotional and experience a sense of happiness afterward, you may be guilty of engaging in retail therapy. With the convenience of online shopping, it has become easier than ever to satisfy your shopping urges with just a few taps on your smartphone.

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While the instant gratification of purchasing something new may provide temporary happiness, it's important to realize that this is a bad spending habit, stopping you from reaching your financial goals.

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Habit of Stockpiling

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Do you find yourself spending money on things you don’t actually need? Remember those times when you suddenly come across a 'buy one, get one' offer on peanut butter while grocery shopping? You feel like you just can't let it go, even though you know that you do not need two of them, or one might expire before you can even finish the first jar. 

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‍Similarly, as soon as a notification of a 50% sale pops up on your phone, you get the itch to start browsing and buying immediately, right? 

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This is called stockpiling, this could be robbing you of the resources that could be directed toward achieving your financial goals. It's important to break this habit and learn how to identify your needs and wants more effectively.

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Shopping As A Status Symbol

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Do you often go out with friends and feel like you should buy something when others are also buying it? You do not want to go out of the store empty-handed, unlike them! 

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It's so easy to get caught in the rabbit hole of celebrity fashion or the desire to impress others with the things you have. Shopping as a status symbol may boost your ego temporarily, but it’s an unhealthy spending habit and hinders your progress towards good financial habits.

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13 Positive Money Habits For Financial Success

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If you are contemplating ‘How can I improve my money habits', here are some essential money habits you can adapt for financial success:- 

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1. Set Financial Goals

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Setting financial goals based on your short-term and long-term needs is a critical step to gain a clear understanding of your current financial position. By establishing these goals, you can determine the amount of money you need to set aside for savings and investments, allowing you to create a well-defined investment plan.

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This, in turn, helps you track your income and expenses more efficiently, helping you get rid of your bad spending habits and paving the way toward good money habits.

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2. Create An Emergency Fund

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Creating an emergency fund is a crucial step in improving your money habits. This fund serves as a safety net to cover unexpected expenses such as medical emergencies, repair work, or any other emergencies that may occur.

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While it may not seem significant when everything is going well, recent events like the COVID-19 pandemic have emphasized the importance of having a financial cushion. To start building an emergency fund, allocate a portion of your net monthly salary specifically for this purpose.

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This not only helps you avoid unnecessary debt and loans but also provides peace of mind during challenging times. Financial experts often recommend aiming for an emergency fund that covers 9 to 12 months' worth of your living expenses.

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Make sure that these expenses are only for essential needs such as food, utilities, loan repayments, and children's school fees. Having such a fund becomes particularly crucial during crises like job loss, as it provides a buffer and allows you to overcome financial challenges without undue stress.

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3. Pay Your Bills On Time

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Credit card companies charge high-interest rates ranging from 14% to even 46% on outstanding bills. By making timely and full payments, you can avoid unnecessary interest charges and maintain a good credit score.

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This not only saves you from paying unnecessary interest fees but also helps you build a positive credit history which further helps in favorable interest rates, loan approvals, and other financial opportunities in the future.

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4. Budget Monthly Expenses

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Creating a monthly budget is one of the most crucial steps toward developing good money habits. Since it helps you in understanding a clear picture of your income and expenses. By establishing a clear budget, you gain control over your expenses and become more disciplined in managing your finances. 

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Financial experts suggest following the  50/30/20 when it comes to budgeting. Allocate 50% of your income towards essential living expenses such as rent, groceries, utilities, and transportation. Dedicate 30% towards your discretionary wants, such as entertainment, dining out, or leisure activities.

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Lastly, save 20% of your income, for your investments or savings. To make budgeting easier, you can use various budgeting apps available that help track your income and expenses, categorize your spending, and provide valuable insights into your financial habits.

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5. Stay Insured

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In addition to having an emergency fund, it is crucial to have insurance coverage to protect yourself and your assets from unforeseen circumstances. Having insurance provides peace of mind as it covers you in case any unforeseen circumstances occur.

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There are various types of insurance that you should consider depending on your needs such as medical insurance, house insurance, and car insurance. If your employer offers insurance benefits, it is beneficial to take advantage of them as it can save you money for other investments.

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6. Start Investing

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Don't let your money sit idle. Instead, make it work for you by investing wisely. There are numerous investment options available, and with the guidance of the right financial advisor, you can choose the ones that align with your risk tolerance and financial goals whether short-term or long-term.

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You can choose to invest in various different options from direct equities, equity funds, debt instruments, and digital gold. But it’s important to have a diversified portfolio to lower risk. Adopting this money habit will help you invest your money so that it outgrows inflation and doesn’t lose its value

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7. Automate Your Money

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Automating your finances is a simple yet powerful step towards building good daily money habits. Automating bill payments ensures that your bills are paid on time, helping you avoid late fees and potential interest charges. It also eliminates the need for manual tracking and reduces the risk of forgetting or overlooking payments.

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8. Plan Your Shopping

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Like you plan your expenses and investments, you should plan shopping too.  You could act smart and shop during big sales. For instance, if you need to purchase a large appliance for your home, wait until the Diwali sale.

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If you want to stock up on the latest fashion and winter wear, the Black Friday sale would be perfect. Thus, planning your shopping strategically can help you save a lot more money.

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The money you save from smart shopping can be put towards your investments, allowing you to grow your wealth over time. By being patient and waiting for the right moments to make your purchases, you'll be surprised at how much you can save.

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9. Start A Passive Income

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One of the greatest money habits of wealthy people is that they have multiple sources of income. High-net-worth individuals often own multiple real estate properties. They leverage these assets for various purposes, such as renting them as venues for events like weddings.

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By generating income from their properties, they create a passive income stream that goes beyond relying solely on a payslip to a payslip. You don't need to go overboard; start small.

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There are many ways you can create a passive income. For instance, do you have a spare bedroom? Consider renting it out on Airbnb, which brings in regular income. If you have a car that is sitting in your garage and gathering dust, enlist them on Ola or Uber. If you have a hobby, start a side hustle with it.

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10. Educate Yourself  On Taxes And Finances

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When it comes to changing your spending habits and cultivating good money habits, one crucial aspect is educating yourself about taxes and finances. Understanding the basics of taxes and having financial literacy can have a profound impact on your overall financial well-being.

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Begin by exploring books on personal finance, as they provide a comprehensive foundation. Look for titles that cover various financial topics, including taxes, budgeting, and investing. 

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You can start with the basics and start with books on personal finance. There are many seminars and workshops regarding the same, staying updated with tax deductions and recent tax laws can help you manage your finances effectively.

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11. Repair

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Be it a car, a phone, or a piece of furniture- it is normal for things to break down once in a while. But instead of rejecting and tossing it out, it is much easier to get it repaired by a mechanic. Or you can do it yourself. Thus, you will reduce waste and save money. This is a great way to develop positive money habits for students. 

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12. Bringing Lifestyle Changes

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Cutting back on regular expenses is a practical approach to changing your spending habits and saving money. Here are some simple strategies to consider:

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Grocery shopping: Online grocery apps have made everyone's life easier by delivering their essentials to their doorstep. But, have you noticed the amount of money you are spending on delivery charges and additional taxes?

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If you compare that bill with that of roadside vegetable sellers or local supermarkets, you will understand how much extra you are paying in the name of convenience. If you are serious about developing a saving habit, take a trip to your local farmers' market on the weekend to buy farm-fresh products. They are healthier and equally cost-effective.

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Coffee and dining out: If you are someone who loves to dine- out regularly. You should try cutting back by cooking your own meals. Start with making your own coffee, later you can try out new recipes and use leftovers to minimize food waste. This can save you a significant amount of money compared to dining out regularly.

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Take a walk We know it’s easy to get on your bike and zoom past the traffic to quickly run errands. But in reality, you are spending valuable fuel, which is already very expensive. 

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So, next time you have to go to your local grocery store or run errands, walk to your destination. Thus, you will conserve // save money, and develop a healthy lifestyle.

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13. Invest Spare Changes In Digital Gold

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If you like online shopping, you may have seen that your payment value is, in most cases, an odd figure. Jar, India's first automated investment app, rounds up these odd numbers and automatically invests them in digital gold for you. It's a smart way to start building wealth with spare change from your online transactions.

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Your investment could be as low as ₹1.For instance, suppose you ordered an air conditioner worth ₹25,288. Jar app would round this amount to ₹25,230 and invest the ₹2 spare change in equal amounts of digital gold.

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To get started, read our blog on how to use the Jar app. Install the app and begin your investment journey today.

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Final Thoughts

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We hope these saving habit tips have helped you. We know breaking bad money habits can be challenging, but it is essential for achieving financial success. When you start your journey of building positive money habits, you will see how quickly you will be able to plan your future, reduce impulsive spending, better handle unexpected expenses, and ultimately achieve financial freedom.