Money is a funny thing. It’s something you always seem to need more of, yet it’s incredibly easy to burn through at an alarming rate. If you want to build future wealth, it’s vital that you learn how to have a sense of discipline when it comes to money. Doing so isn’t always easy, but following a few key steps can be a helpful way to start.
Create Financial Goals
The first step towards becoming disciplined about money is learning exactly why you’re choosing to make this life change. Accumulating money for its own sake seems popular, but in truth, it’s impossible to do so without having a better reason. Start to think not only about the long-term reasons why you want to be better with your money but also the reasons for doing so today. Though most of your goals are going to be aligned with building towards the distant future, having a good short-term goal can make saving money feel like more of a present-day concern.
Create a Savings Account and Contribute
Your next step should be to create a savings account. Open an account with a good interest rate and make sure that you deposit money from every paycheck. The exact percentage you should put in will vary by how much you make and what your other financial commitments may be, but what is important is that you keep adding to this account. Saving money like this not only encourages you to get used to putting money in your savings, but it also helps to create an emergency account that you can use without drawing on your normally-budgeted funds.
Make a Budget and Stick to It
Making a budget is perhaps the most important way to keep yourself disciplined when it comes to money. A good budget does more than tracking your money; a good budget shows you exactly how you are spending so that you can learn more about your own habits. Create a budget that not only allows you to maximize the use of your take-home pay that will align with the choices that you have made about your financial future. Sticking to the budget may be harder than you initially realize, but doing so will soon become second nature if you are willing to get through the initial adjustment period.
Know the Difference Between Need and Want
All the purchases you make in your life can be divided into two categories – those that you need and those that you want. Basic food, shelter, and clothing? Those are needs. A luxury apartment, take-out meals, and designer clothes? Those are wants. Try to sit and think about what you actually need from your life and where you are willing to spend less in order to get more in the future. While some would advocate cutting your spending down to only the bare necessities and focus more on a mantra of reduce, reuse, and recycle. The truth is that all spending is a balance, and only you can decide where your money needs to go in order to keep you happy and motivated.
Understand How to Use Credit
You should also take some time to learn how to effectively use credit. There are two horrifying mistakes that consumers can make when it comes to credit, and neither is discussed with the level of care that should be used. The first (and those that get the most focus) are those who treat credit like a never-ending stream of free money. The second are those who are so afraid of credit that they treat it like it can never be used. In truth, you need to take some time to educate yourself about the different types of credit accounts and how they can intelligently be used by those in your financial situation.
Pay Off Your Credit Cards in Full Every Month
Related to the above tip is the usage of credit cards. If you have a credit card, make sure that you pay it off every month rather than carrying a balance. Doing so will not only help you to reduce what you pay in interest, but it will also help you to quickly build up your credit score. If you don’t have a credit card and you don’t have the credit score to help you get one, try taking out a small credit builder loan to help you establish credit. Working towards a good credit score is part of being disciplined about money.