I had my fair share of money mishaps. I fell for bogus incentives to sign up for credit cards. I chose to purchase a car way above my means. My car payment was equivalent to a one-bedroom apartment in my hometown. I also racked up a large student loan debt and was spending 125 percent of my income. Yeah, the 25 percent was made up using those awesome credit cards I signed up for to get that Frisbee.
I’ve made my mistakes. Eventually, I realized they were mistakes. I began looking at my mindset on all things relating to money. I realized I had some habits I had to break. But, I needed to create new habits if I wanted to get closer to financial independence.
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Back in my graduate school days, I read Stephen R. Covey’s book, “The Seven Habits of Highly Effective People.” The self-help book focused on mindset and elaborated on the concept of different perspectives. The idea that two people can go through the same thing but experience it differently. Covey explores seven habits that make people highly effective individuals.
In my own personal quest for financial capability and independence, I’ve realized seven money habits that make people live richer lives. I call them the 7 Habits of Financially Stable People.
1. Set lifestyle goals. Financially stable folks set clear lifestyle goals. It’s important to have a clearly defined lifestyle goal. These aren’t goals to pay off debt or start an emergency fund. A lifestyle goal is how you envision the type of life you want to live. We can talk about setting financial goals but money only provides the avenue to live a certain lifestyle. If you are unable to articulate the type of lifestyle you want to live getting there is arguably impossible.
Imagine if you were given all the tools needed to drive cross-country from the east coast to the west coast. You feel the excitement of the journey ahead knowing you have the resources to make it 3000 miles across. What happens when you make it to Seattle but you were really aiming for Los Angeles? You’d be surprised that your sun-soaking lifestyle may be impeded with the cloudy overcast.
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2. Live proactively. We might think we are proactive about the majority of things important to us. But, I’ve found when it comes to money issues the opposite is true. People tend to wait to pull credit reports until they’ve been denied credit or only ask to review credit agreements after being hit by an interest charge.
Proactive people ask questions and read the fine print before signing loan agreements. They check credit reports before applying for credit and they proactively call their creditors when situation arises that impact their ability to make payments.
For example, some folks choose not to open collection agency letters thinking it’s less stressful to ignore them. However, doing so may actually waive some consumer protection rights. Others may wait till an emergency to start an emergency fund, but proactive people start today.
3. Organize everything. I once found a $150 refund check for a printer I bought stuffed between unopened letters. Imagine the stress I had the days I was looking for tax return paperwork for a potential IRS audit. It wasn’t pretty back then for me. I realized organizing my financial life needed to take priority.
A step in controlling your money situation is to know where everything is, how long you need to hold onto documents and when to shred them.
Organization means a system that makes things easier to track, store and find when needed. It means organizing your time, home, computer desktop and online accounts. Organization provides comfort knowing where important documents are located and also helps keep you on track of important financial dates and bill payments.
4. Do things electronically and online. I love the tactile feel of paper but my lifestyle is a person-on-the-go. I originally thought holding onto statements meant control. It just meant clutter. Since money has become more digital having a piece of paper in my hands meant it existed someplace just not in my physical wallet. When it comes to bills, statements or anything involving my money, I want to be in control.
Eventually to organize my life, I began opting out of paper statements and found the convenience of logging into my accounts online and getting reminders via email. Online and mobile access to my bank statements, credit card bills, utilities and investments made my life easier and gave me more time doing the things I enjoy. Eventually, I found apps, like Manilla.com that made my money handling life even simpler. Instead of having to log into my accounts individually, I had one place to view all my bills, statements and documents.
Jason Vitug is the founder of Phroogal. Phroogal is crowd sourced financial information enabling social collaboration to share knowledge, discover new tools and connect with money-savvy peers and financial experts. Jason’s mission is to help people achieve financial independence by living rich, phroogally! Read more money stories and experiences on the Phroogal Blog and follow Jason on Google+.
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