When it comes to money, many of us are guilty of making rash decisions that leave our pockets noticeably thinner than before. With so many temptations to fend off on a daily basis, like fancy meals or the latest smartphone, it’s no wonder that we find ourselves splurging at the most inopportune moments.
That said, there are a few financial fundamentals we can learn to counteract our overspending habits and build wealth into the future. Here are four you may want to apply to your own life:
Think About Opportunity Costs
The opportunity costs of the money you spend is everything you could have spent it on but chose not to. Say you go out for wings with a friend and your bill comes to $15. The opportunity cost of that $15 refers to the 5 subway tokens, 6 pairs of socks, or kilo-and-a-half of frozen raw chicken you could have purchased with it but opted not to.
When we think about opportunity costs before making a purchase, we’re more likely to gauge its importance to our overall happiness and make a more rational decision.
Use Debt to Your Advantage
The benefit of debt is that it can serve as a lifeline to either help your business into its next phase of growth, or see you through hard times so you can meet your basic needs. The terms of the debt should, of course, be favorable enough for you to be able to pay it back without issue.
It’s essential, then, that you partner with reputable banks and payday lenders like GoDay who will work in your best interest, help you improve your financial standing, and perform a thorough assessment to make sure debt is the right choice for you. Payday loans, for example, should always be limited to a last resort when you have other options available, such as selling personal items or working overtime.
Optimize Your Fun
The idea here is to take some time and cut down your monthly spending to only what you truly need. Once you notice items that can go, like subscriptions you never use, or brand-name groceries when the generic versions do just fine, you’ll not only have more money to save, but also more money available for activities that make you truly happy.
Whether that’s record shopping, travelling, eating out, or stamp collecting, you’ll have more time for things you love if you stop spending on things you could do without.
Invest in Stocks
It’s important to invest leftover cash so it can grow over the long term and give you a more comfortable retirement. If you have decades to go before you stop working to support yourself, a stock fund will provide you with the best average yearly return on your money—roughly 7% or so.
You can go with an index fund if you prefer a hands-off approach, or an active fund if you like the idea of a professional choosing your investments for you.
With the right fundamentals in place, you can begin to build your net worth, as well as a financial cushion when the inevitable emergency expense rears its head. Make a concerted effort to think about your priorities before you spend money, and there’s sure to be more of it available for the things that count.