There is a lot of emphasis on bad money habits that keep us from realizing our long term financial goals and we each know, by and large, that we are guilty of at least one of these habits when we choose to ignore that little voice in our heads that tries to help us keep our spending in check. In this post, I focus on positive money habits while I seek to validate the good ones that you already have and challenge you to pick up one or two more. Here are 5 good money habits that will set you well on the road towards financial independence.

Save At Least 10% of Your Monthly Income


Many people in their 30s and 40s are still hopeful that their one “big deal” will come through and from the derived proceeds, they will catch up on all the savings they have neglected to make since their 20s. The unfortunate reality is, however, that for some people, the “big deal” has been in the pipeline for over 10 – 15 years and is no closer to seeing the light of day. Does this sound like you?

Imagine a young boy you know, who is in his teenage years and imagine also that the young boy were to tell you that because he believes that he is as good as some football stars from European leagues, he has decided to pursue a career in that line and thus not bother with finishing school or gaining any further academic qualification. What would your advice to him be?

Because you are older and wiser, you know that putting all his eggs in one basket in that fashion can have disastrous consequences, hence, you advise him to rethink his strategy. If your advice to this young boy would be against putting your eggs in one basket, why then would you rely on one big money idea as your retirement plan or your home acquisition plan? At the very least, you should have a backup plan in place. The surest way to financial freedom is to diligently save at least 10% of your earnings and live on the rest. If you spend more than you earn, you are working against yourself on the ladder towards financial independence.

At times when I spend money to buy an item, I see the transaction as a self-sabotaging event whereby, I am helping someone else fulfill their goals while weakening my own position. I feel like I am contributing to someone else’s financial goals when I hand the money over. That is why I have resolved to see my monthly savings as a payment I make to myself and I make this payment first every month; I pay myself first!

Create a Monthly Budget

Writing down all your expected monthly expenses for the month and comparing the total with 90% of your income is a good way to plan and access how your month will fare. Whether you have money left over or you are in the red, budgeting monthly will show you clearly what your spending priorities should be for that month and the expenses you should & should not be making. Budgeting will show you clearly that you cannot afford to take that weekend trip to Ghana with your friends or buy that aso-ebi for a wedding hence you are less likely to overspend and fall into debt (unless you lack self-discipline but that’s another blog post entirely).

I had a friend who would start spending money once he got his salary until all of it ran out midway through the month. He had no budget or plan that showed him how much he could spend on entertaining himself or how much he would need for the NEPA bill for example. When his electricity prepaid meter would suddenly run out mid-month after he went broke, he would either borrow to recharge or forgo electricity all together in has flat until he was paid again.

There are a few ways to budget effectively. I choose to separate my expenses into 2 broad areas; expenses that I have to pay which I call non-discretionary and secondly expenses which I choose to make or expenses that I can influence how much I spend, these I call discretionary. I write out this budget monthly before I receive my income so that as soon as I get an alert of the credit in my account, I settle all my non-discretionary expenses such as savings, utility bills, tithes and debt repayments.

Whatever I have left, is what I call my “net-net income” and this is the potion which I have control over and this is the portion which I monitor to ensure I am able to adjust to any financial “surprises” that spring up mid-month.

To Continue Reading, visit http://www.talkingmoney.com.ng/7-habits-that-will-set-you-on-the-road-to-financial-independence/