6 financial habits that seem bad but are good for you

2024 Author: Malcolm Clapton | [email protected]. Last modified: 2023-12-17 03:44

Loans, split family bills, and a lack of rigorous budgeting are not as unconditional evil as is commonly believed.

1. Pay off small debts first

It would seem that it is more profitable to pay off the loan with the highest interest rate so that more debts do not accumulate. But researchers at Harvard, after a series of experiments, came to the conclusion Repayment Concentration and Consumer Motivation to Get Out of Debt. that our motivation rises when we see small debts gradually disappear. By paying them first, we notice our progress - and we try to pay off all the rest as quickly as possible.

2. Have separate family accounts

In many cases, it is even wiser to have separate accounts: for example, if one of the partners does not know how to handle money or each has children from a previous marriage.

You can also open a general account for family expenses and separate accounts so that everyone has financial freedom.

3. Rent a house

For the young, rented housing is perhaps even better. With him, you are not tied to one place, you can always move if you find a job in another city. In addition, owning a home is also expensive: real estate tax, bills for repairs and maintenance, interest on mortgages.

But regardless of whether you rent a house or pay for your own, strive for monthly payments not to exceed 30% of your income.

4. Take loans

There is nothing wrong with a loan if it helps you achieve one of two financial goals: get an education or buy a home. Both of these options will pay off over time. Plus, if you have a mortgage, you can get a tax deduction.

5. Don't plan expenses

Budgeting is like dieting or exercising: if it's not fun, you won't be able to stick to it for long. If careful planning isn't your thing, try just keeping track of your expenses using the app. Then you will not have a feeling of guilt with every purchase, and if necessary, you will be able to reduce your spending.

Also, start on a pay-yourself-first basis. Save money from every paycheck for retirement savings, investments, and contingencies first. And you can safely manage the rest of the income.

6. Make investments without understanding the market

You don't have to be a stock picking genius or make millions to get a return on investment in the long term. John C. Bogle, founder of the Vanguard Group, the largest investment company, said that it is best for the average person to invest in index funds. They include stocks of many companies, which reduce risk, and they also do not require large investments.