Financial habit #1: Regularly review and update your financial plan
Having a plan for your money is arguably one of the best financial decisions you’ll ever have. However, just creating an initial plan isn’t enough. It’s equally important, if not more important, to make sure you’re reviewing and updating your plan regularly.
Your financial plan is there to help you assess, plan, and improve your present and future financial life. It takes a snapshot of your current financial picture along with your goals to help you create an action plan so you can navigate financial decisions with ease.
To make the most of your plan and improve your chances of success, you’ll want to regularly check your plan at least once a month and aim to update any important information at least every three to six months. Importantly, you should be updating your plan whenever significant life events take place—purchasing a new home, getting married, getting a new job or a salary increase, or having a baby, to name a few.
Financial habit #2: Set financial goals that are meaningful
Setting goals is the first and arguably the most important step to financial success. Without goals, you aren’t able to track progress and celebrate milestones. When forming goals, it’s important to make them “S.M.A.R.T” goals: specific, measurable, achievable, relevant and time-bound.
Here are a few examples of SMART financial goals:
- Pay off $25,000 of debt in 7 months
- Make $10,000 from a rental property in one year
- Increase net worth by $30,000 this year
You can see how all of these follow our S.M.A.R.T goal guidelines. Each goal is measurable and time-bound, making it easy to keep track and hold you accountable to a deadline. They are also specific and relevant to financial success and not impossible to achieve. These examples are much more powerful than vague goals such as “pay off debt soon” or “make more money.”
This financial habit is also scalable and can be done at various points throughout your year. For example, you can create a weekly goal of adding at least $10 to an investment account or a goal that states you will invest at least $500 into your retirement savings each month.
As you can see, financial goals can be big or small — what matters is forming this habit as soon as you can so you can hold yourself accountable towards your success!
It’s also important to make sure that you are setting both short-term and long-term financial goals. By having both, you’ll stay motivated while focused on working towards your financial future.
Financial habit #3: Find passive income to improve your income
If you want to build wealth and pay off debt faster, you have to find ways to make more monthly with passive income. Passive income is essentially money you make residually through endeavors with minimal routine upkeep. A few examples of passive income include rental properties, dividends from stocks, or a side business.
How does this work? With the examples listed above, you only invest time and money upfront to set everything up. Then you can expect to make a certain return from those investments for the short term or long term.
To make this a financial habit, get creative. You don’t need to invest a ton of money into something to get a return. You could rent a room out in your home or even rent out your car on the weekends! Figure out ways to “hack” your life and it can add up substantially — helping you build wealth faster than what you may earn from a standard paycheck.