Does it feel like your financial life has been turned upside down by lockdowns, the pandemic restrictions and all things COVID-19? Now is the time to restore some stability by focusing on getting your finances in order and making the most of your money?
Healthy habits with your money
Healthy financial habits are like any other new habit - you need to work to identify them, develop them, and keep them too. As author Stephen Covey says:
“Habit is the intersection of knowledge (what to do), skill (how to do), and desire (want to do).”
Good financial habits can help you spend wisely, save well and, most importantly, reach your biggest financial goals faster.
Five financial habits to adopt today
To help kick-start this process, we’ve put together five habits that you can adopt to help improve both your financial and mental health.
1. Save before you pay out
Before you pay any bills, pay yourself first. That means saving and investing a portion of your earnings before you do anything else with your money. As author George S. Clason suggests:
"Save at least 10% of everything you earn first, and do not confuse your necessary expenses with your desires."
If 10% is a bit too steep at the moment, save what you can afford - saving something is better than nothing. The important thing is that you’re building a new habit around making some of your hard-earned money work for you. After you’ve paid yourself, the rest of your earnings can then be used to pay bills and purchase the things you need.
“Habits are safer than rules; you don’t have to watch them. And you don’t have to keep them either. They keep you.”
Frank Hall Crane
2. Spending less than you earn
If you routinely spend more than you earn, you will inevitably be building up debt. If as a result you use your credit card and don’t pay it off at the end of every month, you could be potentially exorbitant fees and interest rates that can take years to pay off. As Money Saving Expert Martin Lewis explains, this kind of spending on your credit card can swiftly tip into what the Financial Conduct Authority (FCA) calls persistent debt.
“Persistent debt is defined as "when you pay more in interest and charges on your credit or store card over 18 months than you pay towards reducing the capital (the amount borrowed)."
When considering spending on something you want – always ask yourself if you genuinely need it. You can download a Money Mantra from MSE to stick in your wallet next to your cards from here : Money mantras
“If you are going to achieve excellence in big things, you develop the habit in little matters. "
3. Emotions should not affect your financial decisions
For many people, money habits are tied to emotions and how we feel. It’s easy to fall into the trap of spending money when we’re disappointed, or angry, bored with lockdown, or even when happy. Sadly, such emotions are important, they aren’t helpful when it comes to making financial decisions. Develop a habit of taking your time and making level-headed, rational decisions about money. Don’t allow spending, saving and investing habits to be dictated by the way you’re feeling at a moment in time.
“It is easier to prevent bad habits than to break them.”
4. Control your debt
Debt is not necessarily always a negative. In some cases debt can be a positive stepping stone to help get you closer to a more prosperous future. A mortgage is a form of debt, which enables you to buy a home for you and your family. Similarly, borrowing money for a degree or other education could allow you to get a better paid job. You might borrow money to set up a business.
This kind of ‘positive debt’ requires a balancing act by you; not too much such that it is a source of worry and stress, nor too little as to be ineffective or worthwhile. We all have our own levels of risk we can take on, and the habit here is to control your debt such that you can control it. If you feel you are not in control, seek advice and help now.
A new charity StepChange has been set up with the government to help you with a Covid Payment Plan (CVPP)
“to restore certainty and get your finances back on track after coronavirus.”
The Money Advice Service has a list of organisations offering free debt advice at: Debit advice locator
The Citizens Advice Bureau has a wealth of information on how to manage debt, including how to ‘pause’ repayments if you have been adversely affected by coronvirus.
“Successful people aren’t born that way. They become successful by establishing the habit of doing things unsuccessful people don’t like to do.”
William Makepeace Thackeray
5. Speak to your professional financial adviser
If you want to build your wealth, then develop the habit of seeking out professional advice. An advisor such as ourselves here at Panthera Wealth can help you manage your money, advise on how to build wealth, and draw up an effective plan for fulfilling your objectives. At Panthera Wealth, we can draw on a wealth of knowledge, qualifications and experience that is difficult or impossible to achieve yourself.
How to build new habits into your daily life
Habits should always have a goal. You clean your teeth to keep your teeth and gums healthy, not just for the fun of it (unless we’re missing something here!). So,
- Know your why – what’s your reason for making the changes?
- Set realistic, measurable goals that are achievable
- Break up bigger goals into smaller actions
- Don’t make too many changes at once
- Use rewards as a motivator (within reason) to treat yourself once you meet your goals
As Tony Robbins says:
“Without a clear target, you’ll never hit your mark. That’s why it’s crucial to learn how to set goals that are clear, measurable and actionable.”
Persistence and practice
Once you’ve started good financial habits, keep at them. Soon enough, these good habits will become hard to break.
For expert wealth management advice with the personal touch, contact is at Panthera Wealth: