These two habits will destroy your finance
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Financial freedom and stability are something everyone aims to attain at some point in their lives.
Apart from wanting a life where we can get everything we need or almost everything we need at the instant without having to wait some weeks or months for our savings to lead up to that amount, we sometimes crave the weeks of vacation with friends and family, while enjoying ourselves in any way possible without having to bother about whether your boss will replace you or not before your vacation ends.
Unfortunately, while we crave this lifestyle and work towards it by investing ourselves, learning a trade or skill, investing in money in stocks, crypto, and lots more to attain financial stability, we often make some mistakes that deter us and constantly pull us some steps backward from our goals. As long as these habits exist in our lives, our financial goals will only be a fool's dream.
Spending Before Saving
This is a habit that almost everyone does, and I must confess that I'm guilty of this habit too. There is always something that will make you spend money because human needs are insatiable, which means that the moment you receive your wages or salary as a 9-5er, over 70 to 80% is already off your hands, and within a few days, you'd have nothing left to save due to unending expenses.
This is a terrible way to manage your finance because no matter how much you earn either weekly or monthly, it will never be enough. You will continue to feel poor, and will never attain that level of financial confidence that you crave.
The best way to deal with your expenses is by first saving a certain percentage of your earnings, after which you'd manage whatever is left until you receive your next pay. Doing this means you'd always have something to fall back on and will never be caught unawares in case of an emergency.
It is best to save a certain percentage instead of a certain amount due to certain reasons which I'd be writing about in a few days.
Having too many debts
Debt is a finance killer and having too much debt is one sure way to destroy your finance. Borrowing money comes with a price, and that price comes in the form of interest which will mark the beginning of your financial decline. You're probably wondering how.
I know you'd only borrow money when you have goals to meet up with and don't have sufficient funds at hand. Whenever you borrow money there is always an interest attached to it. This interest is what affects your financial goals because it means you're paying more for what you could have gotten for less. Unfortunately, when the time comes to get rid of the debt, more expenses are already waiting which means that you'd have three options to pick from.
You could either pick between paying the debt and letting go of the new expenses at hand or paying the debt and borrowing again to meet up with the new expenses or going with the expenses and postponing the debt payment.
When you pay off the debt
While the only way to rid yourself of the debt is by sticking to the first option which includes paying off the debt and letting go of the expenses at hand until you've saved enough for it, it is easier to do in theory.
When you Pay and borrow again
Paying off the debt and borrowing again means that as soon as you pay off the new debt, new expenses will always be there to make you keep borrowing and you will be stuck in this loop for a long time unless some miracle happens. You will also be paying a lot of money as interest on each debt and you'd be miserable.
When you postpone the debt payment
Sticking to the third option of going through with your expenses and postponing the debt payment is even worse because more interest will be added to the initial interest on your debt and you will end up with much more debt than you planned. Your new goal will be to pay off the debts you have accumulated with time while leaving your financial goals behind.
This means that you would be making your loan agency richer while you become poorer. They're making money off you via something called compound interest.
Too many debts can reduce the quality of your life!
Conclusion
If you intend to build yourself to a level of financial dependence, you have to develop a habit of saving before spending so you can always have something to fall back upon while also avoiding debts by any means possible. Borrowing money to finance your lifestyle is the greatest enemy of financial growth and is highly addictive.
Avoid the two steps above and you're on your way to financial freedom. You should know that financial freedom is not something you'd achieve in a day. It requires a lot of time, effort, and a lot of discipline.
First posted on my read.cash blog
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Debts should be avoided at all cost. Especially bad debts. One of the culprits of debt is spending more than we earn.
When we spend more than we earn, the more debt we accumulate. This are like shackles on our financial journey which stunt our growth.
Debt that is not utilized to create more income is a no. In other words, clothing accounts, credit cards, and the like should be avoided like the plague. There are good forms of debt, but you still have to be cautious.
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Debt is definitely something people should avoid. I was looking at a few charts but the savings level of people right now is near the lowest point but the credit/debt limit of people is near the highest things have been. People aren't really changing their patterns and I don't think they will until they see how bad things become.
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You're right about this. It is best to always save before spending. Before some of our unnecessary cravings would start calling our attention and we'd end up saving nothing.