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We all want to earn more money. Given a higher salary, we’d pay off our debts, put more money aside for a rainy day and retirement and generally make life more comfortable, right? Not necessarily. According to one financial guru, thinking that you will start saving when your income is large enough is a “money lie” that most people tell themselves so that they don’t have to start tackling their financial problems right now.
Patrice Washington, the author of the Real Money series of financial advice books, says that the examples of celebrities and sports stars who have made millions only to see their fortunes slip away should show everybody that simply making more money doesn’t mean that people will always make the right choices. She says that how somebody manages £100 will show them how they will handle £100,000. Building wealth and financial security, she says, is more about how much you manage to hold onto rather than how much you earn. Millionaires are just as likely to be up to their eyes in debt as somebody who earns very little.
The first and most important step in building financial security is to actually sit down and plan a course of action right now. Washington advises people who want to change their financial habits not to tell themselves that it will be all right “when they earn more” because it isn’t a date to take action.
Instead, she says, you don’t have to wait until making a New Year resolution or when you get a new job or when you hit a certain age, to start making changes which will lead to financial growth.
Other advisers say that focusing on your needs rather than your wants is the only way to learn how to be responsible with money. Otherwise, they say, when you do land a higher paid job or receive a windfall, the extra cash is likely to fade away just like your pay check does currently. To do this, they advise, allocating a proportion of your income to savings should be classed as a need rather than a “nice to have”. Savings should be a fixed cost every month – built into your monthly budget – and should be prioritised before you start spending money on things designed to cheer you up like eating out, luxury items and new smartphones.
A vital step on the path to financial security is to treat every penny that you earn as important. If you aren’t concerned about the pennies that vanish every day, then you won’t be able to keep track of where you are spending money when you are earning thousands of pounds more.
If you are serious about changing your money habits, then you should follow these six steps which will build good financial habits into your daily routines and put you in good stead for later in life:
Oliver Jones has written for Solution Loans since 2015. His passion for personal finance comes through in the 150+ blog posts he's written since that time. His talent for explaining all things money means he's covered topics as diverse as...Read about Oliver Jones
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