Dumb Financial Things That People Do
A healthy financial mindset starts at home. How can any small business owner expect to be successful, if their household spending is undisciplined and spontaneous?
If you can take reign of your personal household debt, increase your savings and invest wisely with your personal income, the follow-on effect in your business is exponential.
Here are my top nine areas where I find anyone can get a head start financially.
Multiple bank accounts.
Creating multiple bank accounts for different things is confusing and difficult to manage. Learn to be more disciplined with how you relate to money proactively by trying these tips:
- Create a household budget of your necessities of life (food, utilities, insurance, mortgage/rent and motor vehicle expenses).
- Allocate a small allowance for non-necessary spending like entertainment and dining out.
- Keep a record of every dollar that you spend.
- Pay all your bills in advance to take advantage of discounts.
- Look for low fee to no fee bank accounts.
Fear and procrastination.
It’s far easier as a single person to create a budget and stick to it. But what happens when you are a couple or a family? Communication is very important. Avoid procrastination and financial anxiety by making the time to discuss what your lifestyle and financial goals actually are. Ensure you discuss this as a couple or as a family unit. The example you will set for your children is a legacy that goes far beyond what your personal net worth will ever become.
Thinking that a credit card is your money.
Get it out of your head that credit cards are the same as a bank account.
Credit costs you money the moment you withdraw funds:
- Keep all your credit cards at home or cut them up.
- The minimum payment on a credit card is not the real amount of money you need to pay back.
- Make the tough decisions to be more disciplined about spontaneous buys.
- Choose low interest or fee free credit card options.
Pay yourself first.
You should always pay yourself first. Never underestimate the compound effect of a little bit each day, week, month, year that can add up over time.
Use an offset account.
Financially smart people put their additional funds into their personal debt to offset interest repayments. All cash flows into the offset account (Work Bonus, Rent, Inheritance, Wages, etc.) which means in the long run less interest.
Direct debit your bills.
Never under estimate the financial benefits of paying your bills on time to avoid late fees and interest charges. How to begin:
- Spend 30 minutes registering all your bills in excel with their due dates.
- Arrange direct debit every month or quarter to ensure you benefit from early payment discounts.
Shop around for services.
Shop around to get a better deal on everything:
- Call around different suppliers and see who can offer you the best price.
- Threaten to leave and ask to be transferred to resolutions and ask for a discount.
Thinking that a budget on its own works.
Just having a budget will not guarantee financial success. You need a system to implement that saving:
- Know what is an essential purchase – power, telephone, food and rent.
- Know what is a discretionary purchase – dark Chocolate, cigarettes or red wine.
Assuming you cannot afford to invest.
Once you have control over your personal spending habits, you may find yourself in the position to start investing for your future. Be it in superannuation or an investment property. This is where learning financial discipline gets exciting. You could start researching how to invest into property without affecting the family budget or start paying voluntary contributions into your superannuation.
All of us have the ability to succeed in our personal expenditure and leave our families with a legacy of financial intelligence. If you ensure that you have control of your personal household budgets, you will be successful as a small business owner.
“The opinions expressed by Smallville Contributors are their own, not those of www.smallville.com.au"
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