Over 60% of Americans claim that money is a significant source of stress. To survive the ever-increasing inflation and all the challenges it brings, you must reconsider your financial habits and plans.
Serhiy Podolyak, Personal Finance Expert and Head of Finance at Headway self-growth app, shares his tips and useful habits for handling finances wisely and avoiding money-related stress in 2023. You’ll also find Headway’s book recommendations to enhance financial literacy and improve your money habits.
1) Define your long-term goals
Managing your finances is all about making hard choices. Long-term goals are essential guides to help you identify the right way, no matter how many options confuse you. To form new financial habits, consider what you want to achieve in 1, 5, 10, or 20 years and identify your motivation behind each goal. Ensure other people's success stories don't bias your ambitions. Start with a shorter period and enlarge your horizon gradually. After you start forming money habits, you will see a clearer picture of your future objectives. Be realistic and remember: when it comes to wealth, you have no one to impress.
2) Consider your daily spending habits
Once you’ve identified long-term plans, focus on what daily financial habits will bring you closer to your anticipated results. Minor thoughtless purchases keep us from major financial goals, but we can turn the table and make tiny positive habits work for us. When you are not sure about the necessity of the purchase, check on your goals and skip buying if it doesn’t match your plan. Cutting out mass-market t-shirts, which end up never worn, and eating out habits may save you a fortune. When it comes to building healthy financial habits, you are to eliminate unproductive habits you already have.
3) Invest in your skills
A recent survey by Headway demonstrates that 2 in 3 people want to be more productive, which typically implies getting more done in less time. Mastering your skills is key to your efficiency and a resulting salary increase. Money-related stress often makes people bite off more responsibilities and projects than they can chew. So, you must focus on improving your qualifications to earn more while doing less. To progress with this new habit, list your strengths and growth areas and research high-demand skills that will take you to the next level in your job.
4) Invest your funds
You mustn’t sit back and watch inflation burn through your savings. Investing may sound complex, but it’s one of those healthy financial habits everyone should consider. Your minimum task is to cover “inflation cost” or minimize loss at the very least. But be careful with your first steps: the most profitable investments may look appealing but could bring significant risks. Start with more secure and simple options and diversify your portfolio to avoid losing all at once. Before investing your funds, return to the previous point and add relevant education to your self-investing plans.
5) Create a backup for the worst-case scenario
You are not alone if new financial challenges seem to come faster than you can manage to adapt your money habits. However, the painful truth is that the situation can worsen at any moment. So, you must keep 10-15% of your savings available that you can readily convert into cash without affecting its market price. As counterproductive as this financial habit may sound — knowing that cash does not create income — it will help in the most critical periods of your life.
These approaches will help you eliminate your unproductive worries about money and build new useful habits to take charge of your personal finances in 2023. Take 15 minutes a day to explore insights from the world’s bestselling authors with the Headway app and hack your progress with this quick return money and time investment. Once the habit is formed, you will be surprised by your fast progress.