An average adult makes about 33 000 to 35 000 choices a day. That’s a lot. How many of those choices are you aware of? And from those that you are aware of, how many of them are related to your personal finance?
It’s super important for us to adopt at least a few financial everyday habits, so that we can speed up the process of reaching financial freedom. Once at least the habits listed below become automated, I guarantee that you’ll notice the effects of them in your bank account. These habits are something that I had to learn and it most certainly took a long time to transform them from conscious actions to habits that stick. I highly recommend that you check out a book called Atomic habits by James Clear.
1. Learn how to budget
This is probably the most important one! Do you have a payday routine? If not, it’s time to create one. My payday routine is something that I have been doing since April 2021 and will continue doing every time I get paid. It starts off by writing down your monthly income (usually from salary) and from that you subtract your monthly bills. Sounds kinda simple? That’s because it is. Then why doesn’t everyone do that?
I like to do everything using a good old fashioned pen and paper. Writing down numbers and making everything manually is much more satisfying than inputting numbers to pre-made excel sheets. Marking plusses and minuses, thinking about how to optimize monthly income and everything else is something that I get a good kick from. Your budget and payday routine doesn’t have to be fancy at all. As long as it does the job, you’ll be far ahead from many people.
2. Make your own lunch to work
You probably knew this already, since it’s as commonly recommended as avoid take out coffee.
But still everyday at work I see colleagues running to the store to grab something quick and easy to eat (which also in most cases is not healthy). Or then I see them run to a nearby restaurant or fast food place. Now don’t get me wrong, there is a time and place for restaurant visits, but doing it every day to cover the laziness of making your own lunch to work? C’mon.
Let’s assume you work 5 days a week for 47 weeks a year (yeah I know these number fluctuates a lot depending where you’re from and what you do). Each day you spend 7€ to buy your lunch from the store (some days more some days less but the average) = total 1645€. I myself have been making my own lunch to work for quite some time now. At least for a few years now. And it’s almost always the same lunch with a few variations here and there. Rice/pasta/potatoes/sweetpotatoes + proteins (chicken or beef). The average cost of my meal is around 2.50€, making my yearly total 587.5€.
Come up with a few recipes that are easy to make with some room for variations. You’ll thank me later.
3. Leave your cards at home - prefer cash
It is much easier to track spending if you are using cash. Using cash was something I actually had to learn!
Paying for stuff has been purposefully made easy nowadays to get you spend more. Apple Pay, Google Pay, contactless payments, paying with a watch or just quickly swiping your card. When is the last time you actually had cash?
Buying something with cash has an actual benefit for keeping your expenses low when compared to other payment methods. Paying with cash gives you physical and visual feedback of your spending since you have to -again physically- take the money from your wallet and watch it be received by someone else. Spending doesn’t feel so good anymore does it? Paying with other payment methods are just numbers running on your screen, and very rarely do you see your account balance get smaller live.
Take 7 envelopes and mark them Monday Tuesday Wednesday etc. Put equal amount of money to each envelope (based on your budget) and only spend on Mondays on what’s inside the corresponding envelope. If you know that you have to do a bigger purchase that day than what’s in the envelope, take the extra money from tomorrow’s envelope. But if you don’t spend Mondays money on Monday and you have some left at the end of the day, you have two options. Put the money aside for savings (preferred) or move the money to next days envelope. Only do the latter when you really know what you’re doing! As said in the title, leave your cards at home when you leave the house. Cash is king!
4. Track your spending as accurately as possible
2023 was the first year I tracked every_single_cent I spent. And I mean it. Every purchase has its own category, and everything is there. And I mean everything.
Prior to 2023 I only tracked my income, tax percentages, etc. and once that became a routine I realized that I had so much information & data about money coming in, but not money going out. That had to change. Starting from 1.1.2023 I first wrote down my spending to my phones notes app = the amount spend and what did I buy. I experimented with a few applications but none of the apps didn’t feel quite right so I created my own Google sheets. I still use the same sheet today (although heavily modified -> I’ll tell you more about how I track my spending in the future!).
I created a super simple sheet which I update every time I spend money, and then a 2023 total sheet to which I transfer all the spending at the end of the month to follow cumulative spending. At the end of each month I also create this beautiful flow chart using sankeymatic that is more easy to read and gives information faster than having to look at bunch of numbers on a sheet.
Getting into the habit of tracking spending is as important as creating yourself a solid budget. Spending tracker gives you the opportunity to view your purchases all at once. From there you can easily view what are your biggest categories, and is there something that you could buy a little less in order to save more money and achieve financial freedom faster.
5. Do I really need that? - mentality
Now obviously there comes a time when we need to spend money. Of course. Basics things like food, housing and transportation should always be covered. With “Do I really need that? – mentality” I’m talking about purchases that I don’t necessarily need. Fancy clothes? No thanks. New phone even though my current one still works fine? No thanks. One more subscription service because it’s “only” 4,99€/month? Yeah definitely not.
I adore the frugal lifestyle. Not that I walk around in broken clothes or that my daughters don’t ever get to do anything that costs money. Of course not. I’m frugal and minimalistic when it comes to for example my own wardrobe. I have two good quality pair of jeans, few t-shirts, a couple of collared shirts and a few hoodies. Then of course underwear and socks. That’s about it. I know every peace of clothing I have, and only buy new when one of them gets broken.
My wife and I also try to keep our house kind of minimalistic (although lately this has been surprisingly hard with two daughters). Recently when we went through all our cabinets, we used the 20-20 rule. If we found an item of which we were not sure weather to keep it or throw it away, we asked ourselves “can we replace this item in under 20 minutes with under 20€?”. If the answer was yes, we threw it away. This proved to be super helpful especially with kitchen-stuff.
The point of this being, always before purchasing something that you don’t need for everyday living, you should ask yourself “do I really need that?”.
6. Health habits
Taking care of your health is something that is not as often thought when talking about becoming rich. But it should be. The art of making good choices everyday to keep your health optimized is super valuable!
If you don’t take care of your health, you don’t have the energy to anything listed above or anything else. Make sure that be basic health pillars:
- nutrition
- sleep
- exercise
have a place in your life. Get sick -> go to the doctor-> pay the bill -> pay the medicine -> time off from achieving your financial goals (and others as well).
“If you don’t have the time to take care your health, you will have to take time to be sick”.
If you liked this post, make sure to check out my other posts from here.
Thank you for taking the time to read this.
-Valtteri