The Oxford dictionary defines a habit as “a settled or regular tendency or practise, especially one that is hard to give up.”. Here we should be focusing on the last part of the meaning which is ‘Hard to give up’. Habits can be said as things that define an individual.
Habits can be anything, from chewing a pen to going on a walk every morning to reading news. Today we will focus on one of the best habits that an individual should have to grow his wealth and become financially independent and it the “Habit of Saving.”
“Do not save what is left after spending; instead spend what is left after saving.” – Warren Buffett
Before deep-diving into this topic, we would first discuss the amount that one should save. In an ideal case, one should follow the 50-30-20 budget rule, wherein allocate 50% of your budget for basic essentials like rent and food, 30% as your discretionary spending and at least 20% for savings.
The spending habits of individuals change every day and with them changes the financial situation. Practising the below habits regularly can help you becomes can help you save a good amount of money and help you become financially independent.
- Plan your financial goals: Financial goals in simple words can be said as the monetary targets that you wish to achieve in your life. It can be anything from anything buying a home or saving for your retirement or saving for an international vacation The first step to inculcate a saving habit is to plan a financial goal for your savings. A financial goal helps you to set a target for your savings, and the progress of achieving the target keeps you motivated to follow the habit of saving.
- Cut the extra expenses: While you are planning to for your inflows you should also keep an eye on the outflows, the outflows here means the expenses. As rightly said by Mr Warren Buffett “Do not save what is left after spending; instead, spend what is left after saving.”. One should work on keeping a track on his expenses and try to limit the unnecessary expenses.
- Set a limit for your fun activities: Though it is very important to use your earnings for your personal enjoyment it is also essential to have a limit to it. It is always recommended to have a balance in spending and savings. keeping a separate budget can help you limit your spends
- Keep your emotions at bay: Oh the Big Billion day is coming or The Great Independence day sale is here! or a 20% discount on your favourite product can definitely excite you or create a FOMO(fear of missing out), these deals can change your mind but you need to always take control of your emotions, the only motivation at this point should be your ultimate Financial goal.
All in all, we can say that following these little but important habits would eventually help you to build a huge corpus and help you to achieve all your financial goals.