A study conducted by Americans, which became the main for the famous book “The Millionaire Next Door,” showed that the level of well-being often does not depend on income level. There are a lot of people earning decent amounts but not having anything. And there are many making modest money but managed to accumulate capital. Among the American millionaires in the study were teachers whose incomes in the U.S. are not the highest.
As it turned out, our well-being is influenced by habits. Unfortunately, many of them prevent saving money and moving towards financial independence. What’s this? Let’s look at prevalent bugs.
Spend more than you earn.
This is one of the most dangerous habits because it leads to bankruptcy in the long term. Initially, the excess of expenses over income is covered by loans, but forever this can not continue. When loans cannot be repaid, the person loses his property. Moreover, the fascination with credit hinders personal wealth growth because buying on credit is more expensive than saving for a thing. Otherwise, there would be no point in handing out money to banks.
Don’t control small expenses.
The sea consists of drops and capital – of rubles (or dollars, who and what is more like). The big one is small, and the small one defines the big one. Often, serious sums are spent on small expenses if they are not controlled. It’s like a leaking mixer – a drop from the pocket runs away “sea” of money.
Believe that there are perpetually expensive assets.
Nothing is forever under the Moon, and any asset can both become more expensive and cheaper. For example, now people have a belief that real estate always grows in value, even though it has become cheaper not so long ago and in the future has little chance to continue growth. According to statistics, the population is decreasing. Unemployment has risen, the birth rate has declined. All this will put pressure on prices.
Don’t invest in yourself.
What will happen to the company if you do not invest in it, do not update the machines, do not buy new technologies? It will become obsolete, the machines are worn out, and the plant will close. A person, as an enterprise, requires investment in himself. Not necessarily material. It is necessary to keep fit, take care of health, read good books and improve skills. This is an upgrade that will allow long to remain in demand in the market.
This is especially important for freelancers because the self-employed do not pay contributions to the PF of the Russian Federation and are not entitled to an insurance pension (only social). Therefore, you need to take care of yourself. And it is necessary to start in advance to hope that then somehow quickly for a year will make a stable personal fund – it is hardly a realistic plan.
Don’t invest in youth.
Investments need to learn, and there is no loss along the way, as in any business. But if in youth with losses, it is easier to accept and have time to accumulate more, then in a more mature age, having started to learn to invest, there is a risk of losing everything and being left with nothing.
Buy expensive things because you “like”.
The more expensive the purchase, the more rational and thoughtful it should be. Spending a lot of money on something you “just like” but expensive can be too wasteful. The joy of buying will occur in a few days (usually within two weeks), and you could earn money for a month and two. The exchange is not equal and is not beneficial to you.
Buy things without taking into account financial opportunities.
There are specific rules described in the article about the basics of financial literacy. You can calculate the cost of certain things, the purchase, and the content, which will not be an unbearable burden. This is important because the excessive load of things and credits that need to be serviced can even lead to problems for a wealthy person.
Forever renting a property.
There are proponents of eternal rent, but the older you get, the better you realize: it is better to have your own. It is more convenient, more comfortable and more reliable. In addition, it will be challenging to rent anything acceptable to most people in retirement. Interestingly, when you ask the proponents of a perpetual rent and how they will live on retirement, they usually say that they will not live to see it. This is because they don’t know what will happen if they live to live.
Spend everything you earn.
It is an extreme that does not allow you to save money and start saving. Often people say they can’t put it off. However, all can help people who earn quite a lot, and such examples are a lot. And to postpone – people who receive modest earnings. Therefore, often the problem is in the habit, not in the level of income.
Conclusion: Bad Money Habits
A freelancer should always have a financial cushion of at least six months’ salary. If you have a mortgage – it is better to have more in the cup. We do not know what will happen tomorrow and what other tests may fall on our time. Therefore, it is not necessary to remain without reserves, especially freelancers.