Financial behaviors are the habits that people use to manage their finances. They can include spending, saving, investing, and even how we spend our time. When handling money in today’s society, it is essential to understand financial behaviors and how they affect us psychologically.
The Good, the Bad, and the Ugly on How to Handle Your Finances
With the rise of technology, people spend more time in their digital world. This has led to increased financial anxiety, which is the fear of not being able to afford things one wants.
The good thing about this is that it has helped people realize their financial needs and better understand how to manage their finances.
The bad thing about this is that it has also led people to spend more than they can afford and sometimes even borrow money to pay it.
The following actions indicate good financial behavior: –
- Developing a plan for the financial future.
- Starting or increasing savings.
- Following a budget or spending plan.
- Reducing personal debts.
- Paying credit card bills in full each month.
- Controlling or reducing living expenses.
- Comparing shops for purchases.
- Setting aside an emergency fund for three to six months.
- Contributing to a flexible spending account at work.
- Calculating how much money you will need for retirement.
- Signing up to participate in your employer’s retirement plan.
- Saving and investing an amount sufficient to fund a financially successful retirement.
- Contacting a financial advisor when faced with complicated financial issues.
The following actions could indicate destructive financial behavior:-
- Purchasing something expensive that was wanted but not needed.
- Reaching the maximum limit on the credit card.
- Spending more money than available.
- Making credit purchase after running out of money.
- Obtaining cash advance on a credit card after running out of money.
- Using cash advance on a credit card to pay another.
- Receiving an overdue notice from a creditor.
- Paying credit card bill late.
- Paying service charge for paying a utility bill late.
- Making vehicle loans or lease payments late.
- Paying rent or home mortgage late.
- Borrowing money from a coworker.
- Obtaining cash advance from the employer.
- Borrowing from a retirement plan at work.
- Withdrawing money from Employee Provident Fund when changing jobs.
- Using a debit card with insufficient funds incurs hefty overdraft fees.
What are the 6 Key Factors that Influence Your Money Behaviors?
The six key factors that influence your money behaviors are:
- The amount of money you have to spend.
- Your income and debt levels.
- Your age, gender, and education level.
- Your personality type and values.
- The length of time you have been saving for retirement.
- Whether or not you have a savings goal in mind.
Conclusion – 3 Important Tips on Handling Money Wisely
Managing your finances is a process that requires time, effort, and patience. Moreover, it is a process that needs to be done step-by-step.
There are many ways to save money, but some can be more difficult than others. For example, saving for retirement is hard because people need to have enough to survive on it when they retire. But if you have kids and want to put money aside for them, it’s easier because you know you’ll need the money when they start college or graduate school.
The three tips on handling money wisely are:
Firstly, make a budget and stick to it.
Second, reduce your expenses as much as possible without compromising much on your lifestyle.
Finally, maximize your income by investing in the right place at the right time.