Most people know the importance of setting good financial habits and practicing these habits to reach their short- and long-term life goals. However, a common mistake many people make when deciding to improve their financial lives is getting overly ambitious. They may try to follow too many habits and struggle to maintain these financial habits.
What’s the solution to this recurring issue? Tanya Peterson, vice president of brand with Freedom Financial Network, said to start with choosing just one or two habits. Here are seven financial habits you can set, and follow, each day to improve your overall financial health.
Pay Bills on Time
You might already be practicing this financial habit on a regular basis! Make bill payments on time. Peterson said you can do this by setting up a system. Consider using an app, online calendar or a paper file on your desk that you’ll use consistently to make timely bill payments.
Check Accounts Daily
How much do you have in checking and savings? Valerie Moses, senior relationship manager at Addition Financial, said to get into the habit of checking your accounts each day.
There are a few benefits to checking in daily. Moses said you’ll know how much money is available at all times and will be able to avoid overdrawing your accounts. It’s also an easy way to detect any fraud that may have taken place. If you believe something has happened, Moses said you can stop it in its tracks and mitigate its effects. It’s also easier than ever to keep an eye on our finances by using online and mobile banking apps.
Practice Habit Stacking
What is habit stacking and what does it have to do with personal finance? Alvin Carlos, financial planner at District Capital Management, said habit stacking is the practice of attaching a financial habit with an existing habit. This helps you to stay focused on the financial habit.
Carlos uses the example that you may check your finances after going for a weekend run or after having coffee on Saturday morning. He also recommends adding a recurring event in your calendar that allows you to review your finances once a month.
Automate Saving 10% From Every Paycheck
As soon as you are able, Peterson said to make saving a habit. Start by saving 10% (more if possible and less if necessary) from each paycheck.
“Make it a habit by automating, so it doesn’t become a decision on ‘should I or should I not save’ a certain amount,” Peterson said. “Banks and credit unions generally let you arrange automatic withdrawal from your checking account to a savings account. Employers often can do automatic deposit of a portion of a payment into a savings account, too.”
Create and Stick To a Budget
If you don’t already have a budget, it’s time to create one. If you do have a solid budget, continue to keep using it. Moses said that creating and sticking to a budget is one of the best financial habits anyone can implement.
“Having a budget in place will give you direction on where your money is going and help you make every dollar count,” Moses said.
Remember, however, that every budget looks different depending on the unique needs and priorities of your household. Moses recommends reevaluating your budget regularly to determine what’s working and what isn’t.
Look For Small Ways To Save
Amid inflation and rising cost-of-living expenses, Peterson recommends looking for small ways to save money. Think washing clothes in cold water instead of hot water and creatively making a few meals using what you have in your pantry and refrigerator instead of running out to the store.
“Perhaps small things will seem insignificant, but getting in this habit develops smart spending,” Peterson said. “Small things will add up — and you might find you’re eating and living healthier, too.”
Set Financial Goals
Financial habits made to stick require purpose. Once you know which financial habits you’d like to start using and you’re able to follow through with these habits, Peterson recommends taking time and effort to determine how these habits will allow you to reach short- and long-term financial goals. This includes retiring at a certain age, going on vacation, having time to pursue a hobby or buying a new TV.
Moses said that keeping financial goals in mind also makes it easier to avoid impulse purchases and stick to your budget. Financial goals not only improve your daily life, but set you up for success in the future.
“Once you focus on what you want to do in life, creating the saving and spending habits that will get you there will become infinitely easier,” Peterson said.
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