Good Financial Habits
Accumulating wealth over time is really quite simple. By far the biggest obstacle to building wealth is overcoming poor financial habits. As with many aspects of life, the simplest things give the best, most predictable results.
So here are the least painful and most productive habits:
- Pay yourself first: If you never have the money in the first place, you won’t miss it! Start small and gradually increase the amount you save each month. Read the Wealthy Barber to get motivated. (You may borrow a copy of the Wealthy Barber from our lending library).
- Live below your means: Just because you bring home so many dollars per month does not mean you must spend them all. Likely the single most important habit.
- Reconcile your bank statements: An account reconciliation provides a good opportunity to see where you spend your money and what fees you are paying.
- Regularly draw up a net worth statement: All you need to do is add up your assets and subtract from them all your liabilities. The difference is your net worth. Over time, you want this to go up.
- Regularly do a cash flow analysis: For a given time period, add up your various source of income and subtract from them your expenses. The resulting figure needs to be positive. Otherwise you are living above your means.
- Carry only one credit card and pay off the balance every month. A credit card balance is a perfect example of bad, expensive debt. And be sure to use a no fee card.
- Make it a habit to contribute to your RRSP on a monthly basis: This is much easier than waiting until the end of the year.
- Regularly review your insurance needs: This would include life, disability, critical illness and long term care insurance.
- Draw up a will: Everybody should have one. Review it as needed.
- Draw up mandates: Mandates for financial and health matters can be considered.
Oh, and start today and pace yourself! A journey of a thousand miles starts with a single step. The sense of accomplishment and control over your financial life you feel when you start accumulating wealth will be well worth it.