A habit is a regular tendency or practice we usually do without thinking. Some habits can be good, while other habits not so much. Think about how hard it is to break a bad habit you developed over time. It’s really difficult, but not impossible if you are intentional about it. This not only applies to our everyday lives, but also to our financial health as well.
To excel in our finances we have to break up with bad habits and give new ones a chance. The new ones will develop over once you begin to take control of your money and make it work for you instead of the other way around. Curious to see if you have healthy financial habits? Here are a list 10 financial habits everyone should have:
1. Track your income & spending
Having a budget is crucial to ensuring that your money is being allocated accordingly. If you have financial goals such as traveling, purchasing a new house, or even paying off debt, a budget will help you do that. If you’re not sure where to start there are a few apps that can help you see where you’re spending your money. Some of my favorites are Mint.com, Clarity Money and You Need A Budget.
2. Spend less than you earn for a month
Living above our means is basically spending more money than we have. I’ve been in this situation before and promised myself I wouldn’t do it again because I was always playing catch up. It doesn’t leave any room for mistakes instead it’s a continuous debt cycle. When you spend less than you earn a month you have wiggle room to save for travel, build your emergency fund, and put money in an investment account.
3. Put money away for a rainy day
This is also known as your emergency fund. This should be at least 3-6 months worth of your essential expenses. By essential I mean things that you need to keep up your current lifestyle. You can easily figure this out by multiplying how much it costs to keep your household running by 3 or 6. Note this does not have to be done all at once, but you should be feeding your emergency account every chance you get.
4. Take advantage of pretax benefits
Pretax means exactly just what it says- which is before taxes. By utilizing this benefit your gross income will be automatically less. Less income means fewer taxes. Some things you can get pretax are your transportation, health insurance, 401k etc. Check with your employer to see other benefits you can enroll in that are pre-tax.
5. Be transparent with your debt
Sometimes looking at our debt is cringe-worthy. Although it can be painful it’s one of those necessary evils. If you want to tackle it head on and create a plan reviewing your debt should be a priority. Not sure where to start? 1. Pull out a blank sheet of paper 2. Create a list of all your debt including car loans, student loans, credit card debt etc. 3. Write down the name of the account, balance, and minimum payment due each month. 4. Choose one to start paying down, create a plan, and get to work.
6. Review all of your statements
I can’t tell you how much money I’ve saved by going through my statements and finding discrepancies. Nowadays it’s easy not to review our statements because it comes into our email inboxes. But if what if I told you could save money if you took some time to review them? Take an extra step and give companies a call to see if they have any specials running, Doesn’t hurt to try.
7. Pay your bills on time
Always great practice to pay your bills on time as much as you can. This can actually save you money because you won’t be slammed with late fees that add up over time. By also paying your bills on time you avoid having your accounts going into collections, which can affect your credit.
8. Separate your savings account
Your savings accounts should always be separate from your main checking account. This is a preventative measure to ensure you won’t be deterred from your savings goals. It’s effective and works even better when everything is automated.
9. Increase your 401k deductions when you get a raise
I don’t know about you, but every time I get a raise I think more money for me. After that quick thought, I get grounded and realize that it actually means more taxation on me. Instead of seeing it as realized income I automatically increase my 401k contribution. This is another way to increase your savings without really putting a dent in your pocket. Remember more money doesn’t mean you should spend more.
10. Automate your savings
Statistics show people are more likely to save money if they automate it and forget it. Out of sight out of mind right? Automation is a great way to make sure you are saving for your goals. It also holds you accountable because you are less likely to spend it on something else.