There’s a strong likelihood you might be practicing some good spending habits already. Even if you aren’t, it’s never too late to begin.
The best day to start embracing sound financial behavior is today. Here are 10 good spending habits everyone should practice on a daily basis.
Follow a Budget
Effective money management starts with a budget. Creating a budget allows you to better understand how much money you have coming in, how much is going out and where this money is going. Use your budget to track fixed expenses (like rent, mortgage payments and car payments), variable expenses (such as groceries and utilities) and periodic expenses (like vehicle registration).
Remember: budgets are not designed to restrict you. Rather, this is a tool to help you achieve your financial goals. Use your budget to track your expenses and make adjustments as needed to find a comfortable balance.
Set Financial Goals
What kinds of short- and long-term financial goals do you have in your life? Do you want to buy a house or car? Are you planning to go back to school? Are you working to get out of credit card debt?
Setting relevant financial goals will allow you to get your spending habits on track to reach these goals. Once you know what your goals are, you’ll have an easier time avoiding impulse purchases and sticking to your budget.
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Pay Yourself First
This is a common habit of good spenders. By paying yourself first, you put money into savings or investment accounts instead of waiting until the end of the month to contribute any leftover income into these funds.
Those who pay themselves first usually don’t miss this money because it has already been put into savings, which means it’s not money you think you can spend.
Pay Bills on Time
One obviously good spending habit is paying your bills on time. Those who pay their bills on time can establish a good credit history and avoid late fees.
If you struggle to remember the due dates for your recurring debts, like credit cards and student loan statements, consider setting these bills on autopay for an on-time payment each month.
Find and Stick to a Debt Repayment Plan
If you have any debt, a good spending habit is focusing on getting rid of it. Review debt repayment plan options to see which is the best approach for you. Once you figure out which plan to implement, get into the habit of working to continually pay down debt. This is especially true of any high interest debt you may carry, which paying more than the minimum amount due on can help you get out of debt even faster and save more money.
Once you’re out of debt, try to stay out of debt. You can still wisely use your credit card, but try to avoid charging purchases that you can’t pay off in full.
Check Your Bank Accounts Each Day
How does checking your bank account equate to a good spending habit? Reviewing your checking and savings accounts each day allows you to see how much money you have available. This can help you keep from overdrawing on any accounts.
Those who suspect their accounts have been targeted by fraudulent charges may stop these issues in their tracks and quickly mitigate its effects.
Invest in Insurance
There are several different types of insurance policies that can save you money when you need it most. A few types of insurance where you may need coverage include health, dental, car, homeowners or renters and life insurance. Depending on where you live and your needs, it may be a requirement to have certain types of insurance.
Save for Retirement
Putting aside a percentage of your paycheck toward retirement helps put you on the fast track to financial freedom and independence. If your employer offers a 401(k) matching program, take advantage of this opportunity and avoid leaving free money on the table. You can also open a Roth IRA and invest your contributions into this retirement account so invested dollars grow tax-free.
Remember to keep putting aside a percentage of your paycheck into retirement savings and max out yearly contributions.
Don’t Give In to Lifestyle Creep
It’s easy to get distracted by lifestyle creep, in which one’s lifestyle starts to become expensive as they earn more money throughout their career. You can control your expenses by paying yourself first to ensure you do not forget about the importance of saving and investing in your future.
Plan for Emergencies
There’s so much in the future we cannot predict. Prioritizing saving for an emergency fund, and regularly contributing to this fund, offers you a safety net amid life’s uncertainties. By having an emergency fund, you’ll be able to build financial security and ensure unexpected expenses do not become future debt.
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