Many of us made new year’s resolution on January 1st. A few of us have already abandoned some of those resolutions. I already gave up on one but I am putting extra effort on others.
How are you doing with your new year’s resolutions? Which ones are you keeping? Which ones are you abandoning?
There are things in my life which are not resolution, they are long-term habits. I want to share some of them and hopefully I will inspire you to pick some of those habits as well.
1. Track your net worth
At the end of every month, I add all my assets, I add all my liabilities, I subtract the liabilities from my assets and I have my net worth.
Here is the formula:
Assets – Liabilities = Net worth.
I find this exercise motivating and illuminating. I calculate my net worth every month and then I pluck the number on a Google Spreadsheet and create a graph.
When I meet a client, this is the first thing I ask them to do. We take a look at their net worth and from there on I can measure their progress.
2. Pay yourself first
As a self-employed person, this represents a bit of a challenge because I don’t have a regular paycheck, but I do have a buffer account. From this account I take a set amount and I put it in my Tax Free Savings Account and I put another little chunk for my traveling expenses and whatever is left, that’s the money I can spend.
In Canada, for 2018 we can deposit up to $5,500 in out Tax Free Savings Account, that’s $458.33/month. And I save for my annual one-week vacation $1,000. That’s $83.33/month. That’s a total of $541.66. So I try to pay myself about $550 every month.
Do you pay yourself first? if so, how much? Which ones are your priorities? Do you spend first and save later or do you save first and spend the rest?
3. Automatize everything
Remember those days (before the internet) when you had to sit at your desk, with your paper invoices, your checkbook, a bunch of envelopes and stamps to write checks to all your debtors? Those days are gone.
Now, you don’t get paper invoices, maybe you get an email. If you automatize your savings and the paying of your bills, you can save a lot of money in late fee payments and save a lot of time by not having to think about whether you paid a bill or not.
I have gone to all my debtors (internet, cell phone, electricity, mortgage, ect…) and I have given them permission to withdraw the amount I owe them, from my credit card or directly from my bank account. By doing this, I save a lot of time and money. I set it and forget it.
4. Having a buffer zone
Life is full of little surprises. I deal with those surprises by having a buffer zone in my bank account. I always try to keep about $5,000. Money comes in, money comes out. Sometimes I dip below my buffer zone, some times I am way above.
Please note. Don’t confuse a buffer zone with an emergency fund. If I am truly in an emergency I can use my line of credit or sell some of my stocks (all of them are a high profit right now).
Having a buffer zone will give you piece of mind. When you have automatized the paying of your bills, if something goes wrong, you are ready for it.
Share your Financial Habits
- What do you do to stay financially fit?
- Do you have some of the same habits?
- Are there other habits you would like to incorporate into your life?
- Are there some habits you would like to get rid of?
- Can you suggest some habits for other readers?
I am a money coach, if you would like to have a conversation about your personal finance, send me a message.