If you’re like most people, you may think that borrowing money is already part of life. Sometimes, you will lack money, so you will have to take on some debt from an authorised money lender.
But did you know that you don’t have to keep borrowing money just for the sake of it? Get yourself free from debt by adopting these five money habits.
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Pay yourself first
In other words, save first and spend whatever remains. Let’s say your budget calls for saving 20% of your monthly income. Each time you receive your paycheque, take 20% and immediately put it in your savings account – no excuses. That way, you can only spend 80% of your salary.
Once you make paying yourself first a habit, you will always have savings every month. In time, your savings account will get bigger, and you will have more money to spend on big purchases or emergencies.
Build your emergency fund
Speaking of emergencies, you should also set aside money for this purpose. Accidents, medical conditions, and other such events can strike at any time, so it’s best to be prepared all the time.
As a rule of thumb, your emergency fund should amount to at least six months of your regular income. So if you earn S$1,000 per month, your emergency fund should be at least S$6,000. That way, in case you lose your main source of income, you can still get by until you find another way to earn. You will not need to borrow money to fund your needs.
Include leisure in your budget
Shopping, clubbing, eating out, and going on holiday can often cause you to overspend. More so if many of these activities are unplanned and not a regular part of your budget.
That’s why you should set aside a portion of your budget for leisure. This way, you can limit your spending for fun each month. It’s harder to go over your budget if you have it planned out in advance.
Live below your means
People in financial trouble often go broke because their expenses exceed their income. In other words, they are living well above their means. They have to keep taking on debt as a result.
But if you do the opposite, which is spending less than what you earn, you will always have money to spare before every payday. You can then add this extra money to your statusborn savings or emergency fund. Eventually, the extra money will add up, and you’ll be able to buy the stuff you’ve always wanted to have.
Invest in assets
Assets are things you buy that give you money back. These include real estate, businesses, stocks, bonds, and rare items like jewellery and artwork. Assets gain value over time, so you can sell them for higher prices you bought them for.
Earning from your assets takes time. With patience, though, you can slowly build wealth as you go along. Speed it up a little by purchasing more assets with your income from existing assets.
Conclusion
You do not have to keep borrowing money to live a good life. In fact, depending on debt is bad for your financial health. Make these five tips your new money habits, and you may not need to borrow money at all.