(Image via Pexels)
Developing healthy financial habits is one of the key ways to achieve financial independence. However, the responsibility of learning these habits often falls on the shoulders of individuals. In this article, we’ll explore some basic tried-and-tested steps you can adopt to develop a strong foundational understanding of personal finance and money.
Avoid Common Negative Biases
Before you start investing your money, it’s important to learn about these common negative biases and steer clear of them:
- Prioritizing Immediate Gratification: It is common for influencers to showcase lavish lifestyles on their social profiles, which, more often than not, encourages their followers to do the same. However, developing a mindset of chasing instant gratification can hinder your long-term financial stability. For instance, buying a car, jewelry, or other expensive items might provide you with short-term happiness, but the debt you’ll incur will only compound in the long term, making it harder for you to afford essentials such as rent, tuition, etc.
- Overreacting to New Information: From crypto coins to NFTs, there has been an explosion of new so-called financial instruments that advertise easy yet high returns. While a handful of individuals will reap the benefits by investing in these volatile instruments, it’s important to steer clear of these if the only reason you feel like investing is FOMO (fear of missing out), as reported by Seeking Alpha. Ideally, you should only invest money that you can afford to lose in such investments.
Create a Positive Money Mindset
- Understand Emotions Surrounding Money: Developing emotional intelligence around finances can help you make rational and informed decisions. For instance, rather than investing in a stock or crypto because you have watched numerous promotions regarding its potential and returns, take the time to research the company/project and ascertain if it aligns with your financial goals and the amount of risk you are ready to take.
- Let Go of Past Financial Mistakes: As reported by Investopedia, even great investors such as Warren Buffet have made numerous financial errors, costing him millions of dollars. Making mistakes is part of becoming financially sound; hence, even if you have made mistakes in the past, forgive yourself and focus on building a better financial future through education and seeking advice from mentors and financial professionals.
Organize Your Financial Records
To manage your finances effectively, ensure your financial records are organized, up-to-date, and easy to access. There are a host of online tools, such as budgeting apps and expense trackers (for entrepreneurs and freelancers) that can be linked to your bank accounts and provide real-time updates.
Additionally, consider digitizing existing paper records by scanning them as PDFs and then uploading them on cloud storage platforms. Following this method will help keep your projects moving from anywhere and stay on top of your finances at all times. If PDFs get too large to manage, you can always split them into multiple smaller files for easier access and tracking.
Think Forward About Your Career
While sound financial practices will help you to save and grow money over time, one of the fastest ways to improve your finances is to secure a higher-paying job. Whether you’re just entering college or still in high school, it’s best to plan ahead and check out all the best options to explore.
In addition to the tech sector, education is also a sound industry to consider as a profession. For instance, if you are evaluating a bachelor of science in education, you can enroll in an online education degree program. These programs cover instructional practice, learner development, and specialized subject knowledge. Moreover, online degrees cost a fraction compared to in-person degrees and can be completed on a full- or part-time basis.
Achieving financial independence is a journey that begins with developing healthy financial habits and keeping negative biases at bay. Additionally, by creating a positive money mindset, one can create a strong foundation for financial success, which can further be developed by pursuing education in a growing field, leading to better financial outcomes. Avoid negative biases, keep your financial records organized, and secure a better-paying job by earning an online degree.
As a one-on-one financial coach, Ted James has seen and helped it all. He created his site, Ted Knows Money, to share money tips and help people get complete control of their finances.