Developing good financial habits is pivotal to maintaining a healthy financial life. It can be the most important tool you have to reach your goal of eliminating personal debt. Regardless of any bad money habits you’ve had in the past, there’s always time to make changes for the future.
When adjusting your approach, don’t hesitate to learn from others. This could be the difference between success and continuing down the same old path.
Below, we’ll examine nine good financial habits. Let’s get started!
1. Have a Budget
The median household income in the United States in 2018 was $63,179. Whether you earn more or less than this, a budget can help keep your finances on track.
When you know how much you earn, it’s much easier to determine how much you can comfortably spend each month.
2. Avoid Higher Interest Debt
If you’re paying a high interest rate on debt, and you had the opportunity to pay a lower rate that might lessen your monthly payment, why wouldn’t you?
3. Understand Your Financial Situation
You need to understand every aspect of your financial situation. From how much you earn to how you’re spending your money, every last detail is important.
With an understanding of your finances, you’ll always know what makes the most sense for you and your money.
4. Learn From Past Mistakes
Learning from you past mistakes is one of the most critical money habits you can form. Even the most successful people make financial mistakes from time to time. For example, maybe you buried yourself in store card debt. Or maybe you “bit off more than you could chew” with a car loan.
It’s okay (but not preferred) to make financial mistakes, as long as you learn how to deal with them.
5. Set Goals
Have you set both short- and long-term financial goals? Are you tracking your progress, month in and month out?
Taking this one step further, you can do more than think about goals in your head.
According to a research study completed by Gail Matthews at Dominican University, as cited by Forbes, people who write down their goals accomplish “significantly more.”
See where putting your goals to paper takes you.
6. Ask Questions
Although you know your financial situation better than anyone else, there are times when it makes sense to ask questions.
For example, a CPA can provide guidance related to your tax situation. With more than 664,000 of these professionals in the United States alone, there are plenty of options for advisement.
7. Save for Retirement
According to the Economic Policy Institute, retirement plan participation has declined despite the fact that many members of the Baby Boomer generation are approaching retirement age.
Along with the above, another statistic suggests half of working families have no retirement savings.
Others, meanwhile, are on track to retire early.
You won’t be alone if you opt against saving for retirement, but if comfortable retirement is one of your goals, then looking towards the future and putting a bit of money away for retirement are good financial habits to get into.
8. Automate YOUR Savings
There are many reasons why people may not save as much money as they should. For example, they may touch every bit of money they earn, meaning it never ends up in the right place.
Protect against this by automating savings. Think about it like this: you can’t spend money that you don’t see or touch.
9. Pay Down Debt
Taking on debt can be a successful strategy as long as you’re comfortable with two things:
- The monthly payment
- Your ability (and willingness) to pay down the debt.
The longer you let debt linger the more you’ll pay in interest. Furthermore, debt can hold you back from reaching other goals, such as saving for retirement.
If you implement these nine good financial habits, you may end up feeling better about your current situation and what the future will bring.