5 Money Habits of the “Financially Wise”!
Ever wondered how the truly “financially wise” approach their day to day personal finances? This week, FinEdge presents 5 money habits that are nearly universal to all those who are en route to financial Nirvana!
Money Habit #1: They are thrifty
If you thought that the rich got rich by being flashy, over the top, flamboyant free spenders, think again! Quite on the contrary, most members of the Financially Wise community are thrifty and maintain tight controls over money leaks. They cut corners wherever possible, drive hard bargains and economize their resources. This doesn’t mean they don’t spend money on quality life experiences – it just means that they do so consciously! In other words, they divert money from money leaks to important purchases and valuable life experiences.
Money Habit #2: They understand risks, invest more, and speculate less
The Financially Wise are not necessarily risk-averse; they are, however, “risk conscious”. They understand and appreciate the concept of risk and reward, and research their investment options thoroughly before committing funds into them. They also have a tendency to scout for value rather than seeking quick speculative profits; and are willing to exercise patience in waiting for that value to be unlocked.
Money Habit #3: They create multiple income streams
The Financially Wise try to create multiple sources of income. Examples of this include: saving up over the years to purchase a commercial property and then letting it out, investing in a hybrid mutual fund and selecting the dividend option, financially backing a promising startup venture as an angel investor, or even starting a small business (that doesn’t require their focused attention) alongside their main area of work. Either way, the Financial Wise try to hedge their bets so that all their cash flows don’t come from a single source. They are also experts at delaying gratification – for instance, one may need to make short term sacrifices to save in a 5 year SIP to accumulate a lumpsum for purchasing a commercial property. But once they acquire it, their lives become a lot more comfortable and insulated from financial shocks.
Money Habit #4: They don’t buy things they can’t afford
The Financially Wise view credit cards as a convenience tool and not a borrowing tool! Nor do they lose sleep over “keeping up with the Joneses”. They almost never stretch their financial position by over-borrowing, and they limit monthly EMI’s to a bare minimum – preferably below 20% of their net monthly income. Lastly, they follow the ‘sleep on it’ rule for resisting impulse purchases – they sleep on their decision and decide the following morning instead! As Warren Buffett once famously said – “if you buy things you don’t need, you’ll soon have to sell things that you need”
Money Habit #5: They save smartly for the future
…And by “Smart”, we mean Specific, Measurable, Attainable, Relevant and Time-bound! In other words, (much like long range shooters) the Financially Wise have the foresight to predict goals that are many years away (for instance, their retirement) and attach high levels of relevance to them. They then proceed to put numbers and milestones against these goals and implement a highly feasible plan of action to meet them. As a wise person once said – “Failing to plan is planning to fail!”