Alright, so you want to build FIRE. Your mindset is set. But where should you start? As with other big goals, start small. Here are 5 beginner financial habits you can absolutely start right now.
1. Budget
Zero is the ideal budget. This is obviously unrealistic though because you have to live – so the first step is to include the absolute essential of rent/mortgage, which, if you’re in the UK, is probably quite high.
The best way to reduce this huge expense would be to find an area that is both cheap to rent and in a good location to bike to shops/work/hospitals etc, but often you’ve already chosen where you’re living and it’s difficult to change.
Other budgeting advice recommends including transportation, food and bills in your ‘essentials’ list – but I often find that these can be reduced. If you still have debt with a 5%+ interest rate, you cannot afford convenience if you want to reach financial independence soon!
At any rate, convenience leads to mediocrity, which might as well lead to the bedpan and catheter.
One way to reduce transportation is to find a way to bike everywhere, rather than drive. MMM has some excellent posts on the huge monetary advantage of bikes, as well as how their health benefits make them safer than cars.
2. Gratitude
Yes, I know, you can find this in literally every self-help guide ever. Sometimes, listing everything you should be grateful for just makes you feel worse for feeling bad.
That’s why I would recommend gratitude as a daily habit, rather than as a last-ditch mood booster. There’s a reason why gratitude is in every self-help guide ever – when you list all the things you’re grateful for, you look out for those little things more often.
As a result, you become content with what you have, and slowly your envy of others’ things will lessen. Why crave more stuff when you have plenty already?
3. Checking Accounts and Net Worth
This will take 3 minutes max – 1 minute if you have them all on a handy app like Personal Capital or Mint.
There’s the practical reason to check that no dodgy activity is going on – fraud is a right pain – but there’s also the quiet thrill of watching your number tick towards financial freedom.
4. Shopping Around
If you really must go shopping, get familiar with all your local shops and their price points for similar products. Also, get familiar with what time of day (groceries)/year (clothes, appliances etc) they have sales.
If you can, shop second-hand (there are some real gems), and use codes (future post to come!). Jump on the cashback train if you’re shopping online.
Once you get the hang of getting discounts, you’ll be able to save loads without putting in much effort!
5. Cost-Per-Use and Life Cost
If you find yourself suddenly holding an impulse purchase that you’re trying to justify to yourself, figure out the expected cost-per-use and life cost of that item. Be honest!
Cost per use is the amount of money you will pay for that item, divided by the number of times you expect to wear it. The lower, the better value for money. If the item is seasonal or trendy, it will significantly increase the cost per use, so definitely reconsider it!
Life cost is the total cost to the world of producing it, and the cost to you of looking after it, storing it and repairing it. Once you’ve bought it, consider it yours for life – will you be able to take the burden of adding it into your life, permanently?
These habits are built by reframing the things you see every day – and as Jim Ryun said, “Motivation is what gets you started. Habit is what keeps you going.”
