Developing and maintaining healthy financial habits can significantly impact the financial future of a person. As Scott Tominaga points out, not enough planning and overspending can lead to a lack of available funds when the unexpected occurs. Developing a proper financial plan is needed to help people understand what monetary resources are available to them as well as what kind of expected expenses they may incur.
Scott Tominaga marks a few financial habits people should try to adopt
Good financial habits play a crucial role in an individual’s or a household’s financial well-being. They contribute significantly to financial stability, security, and the ability to achieve long-term goals. Here are a few financial habits people must try to adopt in 2024:
- Set meaningful financial goals: Setting goals is arguably the most important step to achieving financial success. Without having proper financial goals and objectives, one would not be able to effectively track progress and celebrate milestones. Hence, people must prioritize setting “S.M.A.R.T” goals: specific, measurable, achievable, relevant and time-bound.
- Review and update financial plans regularly: Just creating an initial financial plan is not enough. It is equally important to review and update the plan regularly as per changing financial situations, market conditions and so on. The financial plan is meant to help people assess, plan, and improve their present and future financial situation. It essentially takes into account the current financial condition of a person, along with their goals, so as to develop an action plan that allows people to navigate financial decisions with ease.
- Prepare a budget and stick to it: Preparing a thorough budget is an important habit that can significantly contribute to the financial well-being of a person. This budget helps people to gain a better understanding of their expenses so that they can make necessary adjustments and try to live within their means. One must be realistic enough when formulating their budget and take into account all necessary expenses. Provisions for savings should also be made prior to including any discretionary expenses.
- Find passive income source: If a person wants to build wealth and pay off debt faster, they need to find a source for passive income. Passive income implies to the money one makes residually through distinctive endeavors with minimal routine upkeep. Rental income and dividends from stocks are a few of the most common examples of passive income.
- Build an emergency fund to protect the assets: Emergency funds act as a vital safety net to make sure that a person does not dip into other funds designated for the routine expenses. If one does not have an emergency fund, then their odds of accumulating debt go up as they may have to use the money they had set aside for credit cards or other bills in order to pay for the emergency expenses. People should ideally have an emergency fund that covers three to six months of living expenses.
As Scott Tominaga mentions, by adopting the financial habits discussed above from the year of 2024, one can get closer to their financial goals and secure their financial future.