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Simple Habits That Can Help You Attain Financial Freedom

Simple Habits That Can Help You Attain Financial Freedom
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If you’re reading this article, likely, you’re already well-versed in the basics of personal finance. You have a budget, know how to invest, and have created an emergency fund. And yet – somehow – your money still doesn’t seem to be adding up.

The answer can’t be more simple: Start by building good habits around spending less than you earn! It sounds too obvious to work but several strategies are simple but effective. You will need to commit some time and energy upfront for these methods to work their magic alongside the following three pillars of personal finance: Budgeting, Investing, and Emergency Fund Building.

Here are 4 tips that can help you build the wealth you need.

1. Automate your savings

Automating your savings is one of the most effective ways to set aside money for long-term goals. It’s not sexy, but it works! Here’s how it works: Your savings will transfer directly from your checking account to your investment accounts each month, without you actually doing anything.

Simple Habits That Can Help You Attain Financial Freedom
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Using automated transfers has three benefits: (i) You won’t have to worry about whether or not you’ve transferred money; (ii) You won’t miss the money because it goes by so quickly; (iii) It takes practically no time to set up.
There are only three steps to take to automate your savings:

Step 1: Decide on an amount that you want to save each month. The amount will depend on the goal that you’re saving for, but 10% is a good rule of thumb. You may need to start small, but try to get up to the 10% mark as quickly as possible.

Step 2: Decide where you want your money invested. Investing too much in cash accounts can be dangerous in times of market volatility, so think about investing in a mix of stocks and bonds/money market accounts to provide some stability for this cash.

Step 3: Automate your bank accounts and inform your bank. You should also discuss such financial decisions before your partner or spouse. And build a portfolio by diversifying your investment.

2. Maintain an emergency fund

Most people have heard of the term “financial safety net” but don’t think much about what it actually means. The truth is that you do not need an emergency fund to survive, but you should have one if it makes sense for your financial situation. The best thing about having an emergency fund is being prepared for unexpected expenses.

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Let’s say that you have a $10,000 annual income and no emergencies pop up each year. Your cash flow will be fine for this year, but next year will bring all kinds of expenses that are likely to overwhelm your normal cash flow.

And what if you get sick? Or your car breaks down? Or the market crashes? There are so many things that can happen. Since the future is uncertain, start saving today. Start by trying to save at least 20% of your total monthly income. And increase the financial savings every year. You can also treat yourself with a little amount of savings with vacation when you reach your goal amount to motivate yourself.

3. Cut unnecessary expenses ruthlessly

Cutting expenses isn’t always fun, but it’s one of the easiest ways to save money. Often, people have no idea how much they are really spending on things like eating out, shopping, and utilities. They’re simply spending money because that’s what they do. Your goal is to identify these expenditures and cut them down to the bare minimum.

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It’s pretty easy to identify areas that you can cut back in; here are some simple financial tips:

Tip 1: Cut out cable television completely. There are roughly 10 million cable television channels in the U.S., and most of them show the same content anyway (there are only 6 networks). Instead, pick an affordable streaming site and stick to it.

Tip 2: Eliminate or reduce your monthly grocery bill by 10%. This is a more difficult task, but you will be more satisfied with the results if you do a little research first. Shop on your food on sale and do not buy items that you aren’t really sure about.

Tip 3: If you haven’t already, cut back on any of the “daily luxuries” that you no longer need or want. Eliminate junk mail from your house. Stop buying magazines and books that don’t interest you. Instead, invest in an e-reader or read books online.

4. Negotiate payments

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Negotiating with your payments is almost always a good idea, but it’s especially important if your payment is high. If you’re paying $200 per month on a credit card, for example, and you can pay $150 per month for six months, you should do so. The interest rates on such cards start to get really high after six months – and who knows where they’ll be in six months? You may not even have the card for that long! So stop wasting your money. Pay the amount before the six months.

Also read: Best Ways To Invest Money To Grow Your Worth