For many people, making sound financial decisions just means being hyper-aware of expenses, saving money, and avoiding debt. Those are good things, but that’s not all there is to being wise when it comes to money matters. Sometimes it’s about asking reliable money lenders for assistance, using goals as a motivation to save money, or focusing on gains in your career. 

Here are some decisions that are going to do your wallet much good in the long run: 

Setting up a realistic budget

Budgeting is a good thing, but putting too many rules on it can backfire on you. Instead of having a guide for your finances, you might intentionally ignore your budget. Setting a budget and then splurging later on because you feel to restricted by it happens more common than you think. 

The key is to know your spending habits first before setting one. If you discover that you are a spendthrift, make gradual changes to your spending habits instead of setting yourself up for instant failure by drastically expecting to be wise with money.

Make sure you also update your budget to account for inflation, salary increase or higher cost of living. Set a regular time for updating your budget. A monthly checking would be just right.

Setting financial goals

Your purpose is the backbone of your financial plan. It would be easier to follow your plan and not get distracted by new shiny things if you know in your heart why you are doing this. Think of it as the ultimate form of self-care. You are taking care of your future self by making sure he/she will have enough funds for basic needs and wants.

If you know the reason why you are doing what you do, and why you are being cautious with your finances, you will not get easily tempted, even on days when you just don’t feel like being responsible. 

It’s possible that one day you’ll feel so overworked, stressed, and self-deprived for too long that a well-placed ad for a designer bag is all it will take for you to blow a chunk of your savings. But if you have a clear goal and motivation, you’re more likely to avoid that. 

Creating multiple income streams

Due to the pandemic, we suddenly learned  that stability is pretty fragile. You can lose a stable job or a steady source of income in an instant. That’s why many of us learned the importance of other income streams. 

Although this will not make you 100% safe from economic downturns, you will have a lifeline in case you lose your job or your current salary can no longer cope with inflation.

Upskilling

News of companies terminating thousands of employees and choosing to invest in Artificial Intelligence is concerning. Because of that trend, employees should be on their toes. Even if you are good at your job, you can no longer sleep too soundly at night with the knowledge that you might be laid off come morning. 

To address this uncertainty, people have been looking for other skills aside from what they have now. By upskilling, you are giving yourself more opportunities to earn while learning at the same time. Learning to use AI and other emerging technologies would come in handy in the near future. Use free resources on the internet. 

Look for skills you have always wanted to learn, especially those that are aligned with your interests or your current field. Take the time to learn so you can be equipped and ready any time the unexpected happens.

Setting up an Emergency Fund

Life is full of uncertainties. No matter how healthy you are right now, you might get sick or worse, get hospitalized due to illness or accidents. These scenarios tend to be expensive. Your savings, if you have some, can easily go down the drain if you need to pay the hospital, buy medicine or be unable to report to work for a considerable period of time.

As a rule of thumb, set aside 6 months-worth of your expenses as Emergency Fund. If you are finding this hard, try a 3-month target first. Gradually increase your target once you reach it. When you encounter temptation, remind yourself that you are going this to help your future self and assist in easing whatever difficulty he may encounter.

Setting up a Fun Fund

It’s hard to stick to good habits. We are humans after all. We are bound to fail especially if we rely only on our willpower. Expect that there will be days when you just want to let your hair down and treat yourself. After a week’s worth of hard work, you deserve to have some me time. The problem lies in making sure your me time will not result in a big hole in your savings or in mindlessly spending your budget for the whole month. 

Set aside some money for things you enjoy like going out to have some good coffee or delicious food. Train yourself to use only what you have set aside for these activities. Of course, if you end up not using the funds, you can have more funds for when you finally want to go out with friends or watch a concert.

Prioritizing debt payment

When you finally have money, it can feel unfair to allocate most of it to debt payment. After months of cutting down on costs, you also want to enjoy your hard-earned funds. Take a deep breath and a step back. Rank your outstanding obligations based on which of these have the highest interest rates. Just think of this as shortening the time when you have to allot your income to payment of obligations. The faster you pay your debts, the faster you can enjoy your money or put it in income-generating ventures.

Conclusion: 

Doing the right thing isn’t always easy or straightforward. Nevertheless, it will propel you towards a better path and a healthier, happier life. Do not let feel-good spending sprees, stagnation in your comfort zone, and old-school saving strategies that no longer work rob you of a better financial future. 

So, when making a choice, ask yourself if this will help your future self have a more fulfilled and content life.If the answer is yes, commit to it.