7 Financial Habits that will Help You in the Long Run - Varthana

7 financial habits that will help you in the long run

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Financial tips

Financial literacy is an essential skill with a direct impact on overall personal well-being.

As a college student, you may be navigating a new world, focusing primarily on education, personal development, and establishing beneficial habits. However, one often overlooked but crucial habit students need to cultivate is sound financial practices. Financial literacy plays a pivotal role in fostering these healthy financial habits.

But, what exactly is financial literacy? It is the ability to understand and effectively use various financial skills. These skills include money-saving practices, discerning wants from needs, managing a budget, timely bill payment, asset acquisition, affording college, and retirement planning.

Learning and incorporating healthy financial habits and money management skills from an early age can provide ample opportunities to apply these skills in real-life scenarios. Students who grasp money’s nature and its mechanisms can circumvent enduring financial difficulties throughout their lives.

Here are some healthy financial habits that can serve you well in the long run:

Planning Monthly Budgets: 

College life is an enriching experience, and soon after, you’ll embark on your career, purchase a home, and potentially start a family. Learning to formulate a budget is key to ensuring that your expenses always align with your needs. The first step towards building robust financial habits is creating a monthly budget. Financial experts often recommend the 50-30-20 rule for budgeting: allocate 50% of your income for essentials such as rent, groceries, utilities, and transportation, 30% for discretionary spending like entertainment, trips, and dining out, and finally, save or invest the remaining 20%. Utilize budgeting apps to help you track income and expenses, categorize your spending, and gain valuable insights. A monthly budget will empower you to control your expenses and instill discipline in financial management.

Educating Yourself on Taxes and Finances: 

Education is a vital precursor to habit formation, as it provides a solid foundation for informed decision-making. A comprehensive understanding of taxes and finances can significantly influence your financial wellness.

To start, delve into books on varied financial topics, including taxes, budgeting, and investment strategies. Plenty of webinars and workshops are available, alongside numerous social media pages and YouTube channels offering financial education. These online resources, which are often free, can be invaluable in your financial learning journey.

Also Read: 5 High Income Skills To Learn In 2023

Developing Passive Income: 

Creating passive income sources can add a substantial cushion to your primary income. This practice is a common habit among the financially successful and wealthy. Consider part-time jobs or convert your hobbies into income-generating pursuits.

For instance, you could sell your photographs, offer your services as a photographer at events, sell your artwork, perform at events, provide tuition, teach dance, or monetize any other skills you possess. You might also consider creating and selling digital products such as e-books, online courses, or stock photos on platforms like Amazon Kindle, Udemy, or Shutterstock.

Minimizing Unnecessary Expenses: 

While it seems straightforward, curbing unnecessary spending can be challenging. Regularly track your monthly bills and essential expenses to determine how much disposable income remains for shopping and leisure. It’s also important to plan your purchases alongside your investments, tuition, and other obligatory expenses. Consider shopping during sales for big-ticket items, and avoid purchasing items that are still in functional condition.

Use discount codes when shopping online, and consider canceling subscriptions to platforms you rarely use. This could save you money and allow you to focus more on your studies or career. If you enjoy dining out, try to pick up your orders from the restaurant to avoid delivery charges. Financial stability isn’t merely about earning; it’s about how much you retain.

Investing: 

Don’t let your money sit idle in a savings account, where it won’t grow or contribute to your progress. Seek the guidance of a financial adviser and choose investment options that align with your risk tolerance and financial goals. You can invest in mutual funds, bank fixed deposits, post office monthly income schemes, gold, RBI bonds, digital gold, or real estate.

While there are numerous investment methods, staying informed about evolving trends is vital for successful investing. Begin with small, cautious steps rather than making risky leaps, which, while initially tempting, can lead to substantial losses. Investing enables your money to grow and retain its value.

Also Read: How To Help Your Financially Struggling Parents?

Creating an Emergency Fund

It’s vital to establish an emergency fund, a financial safety net for unexpected expenses like medical emergencies or sudden repair needs. While the importance of such a fund may not be apparent during smoother times, unforeseen events, like the recent Covid-19 pandemic, underscore its necessity. You can start building this fund by setting aside a certain portion of your income specifically for emergencies. Financial experts typically suggest an emergency fund that covers approximately 9-10 months’ worth of living expenses. This fund can help mitigate unnecessary financial stress and provide stability during challenging periods, a practice particularly beneficial for students who will assume greater responsibilities in the future.

Staying Insured:

Beyond an emergency fund, insurance coverage is essential to safeguard you and your assets against unpredictable situations. An Economic Times study reveals that 30% of Indians lack health insurance, a gap that could cause significant hardship during a medical crisis. There are various insurance types available to secure you and your loved ones, tailored to specific needs like health, motor, home, travel, and life insurance. You can also benefit from government schemes such as Pradhan Mantri Jeevan Jyoti Beema Yojana and the life cover under Pradhan Mantri Dhan Jan Yojana. Insurance is a crucial financial habit that can prove invaluable in the long run.

Conclusion

Developing and sustaining healthy financial habits requires discipline and resolve. The practices highlighted in this article can guide you towards a financially secure and rewarding future. Start with small financial habits and remain consistent; the long-term benefits will surely surpass the efforts invested.

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