Developing healthy financial habits takes time and discipline. Going for a run before work one morning won’t make you automatically leap out of bed and hit the trails every morning after. Replacing unhealthy foods with healthier alternatives doesn’t mean you won’t crave a sugary snack from time to time.
However, as you put the time and effort into developing healthy financial habits, they eventually come more naturally. Once you’ve gotten up and worked out several days in a row, it will start getting a little easier to wake up and go than it was the first couple of days.
Developing the right personal finance habits is no different. It takes time and discipline to develop lasting habits. As you stick with it, however, you will find it’s easier to keep these habits up once you’ve put the effort into making them a regular part of your finances.
Here are five healthy personal finance habits to start working on now.
- Check your credit
Being honest with yourself about how much you owe and how much you can afford to spend can be humbling and sometimes downright terrifying. It’s important, however, because knowing where you stand is a big part of being able to make progress!
Part of knowing where you stand includes knowing how much disposable income you have available each month. Getting in the habit of living below your means is vital to digging yourself out of debt and taking care of your future self. When you live below your means, you are creating a budget that has money left over each month. This money can then be put towards both savings and paying off debt.
You should also know where your credit stands. Sites like annualcreditreport.com will provide a free credit report, and you can use creditsesame.com and creditkarma.com to keep an eye on your credit score more regularly. Checking your credit is not only important for your long-term financial goals, like buying a house, but also for catching indications of identity theft.
- Monitor your spending
In a world where it’s easy to swipe a piece of plastic to pay for everything, it’s hard to know exactly where money goes without putting some effort into it.
Get into the habit of keeping track of where exactly your money is going each month. I’m talking about every dollar – cash or plastic. Break it up into categories, and make sure to write down where you spent your money, what you spent it on, and when you did it.
Keep a notebook in your purse, or start a note on your phone. Better yet, use a tool like Mint that helps you track your spending and makes budget suggestions for you based on it.
Once you have this record of where your money goes, create a budget that works for your family. You’ll likely be shocked at how much you spent in some categories, and creating a budget is a great time to commit to cutting back a little in certain areas. Don’t get too overzealous with the cutbacks, though, because part of being successful with budgeting is making sure you can actually stick to it.
- Attack debt smartly
Not all debt is the same. If you’re serious about developing healthier finances, take the time to list out all outstanding debts. List who you owe, how much you owe, the interest rate, and the term/payoff date. Look at this list carefully and determine what debts have the highest interest rates.
These high-interest debts are what you want to pay off first. Begin making just the minimum payments on debts with the lowest interest rates for a while and put the extra towards your higher-interest debts until they are paid off.
Consider getting a side hustle, like driving for a ride-sharing service on the weekends or selling something creative you enjoy making online, to earn extra money to put towards paying these high-interest debts off quicker. Paying off high-interest debts first will save you money in the long run, and paying it off early is an amazing feeling.
- Plan for the future
Whether you’re 25 or 45, now is the time to get serious about retirement planning. It may seem like a long way away, but starting to invest in a retirement account now can mean a better future down the road. It may not seem like the most glamorous way to spend your money now, but you’ll thank yourself in the future.
While long term savings goals like retirement are important, so are short term financial goals. It’s hard to put extra money in the bank instead of treating yourself to a nice dinner or new outfit. However, developing healthy saving habits is key to financial stability. Having money in savings when an emergency strikes, or when an amazing opportunity presents itself, can be the difference between going into debt or not.
Revolutionize your saving habits by opening multiple savings accounts, each with a specific purpose. Open one for an emergency fund, one for traveling, one for a long-term personal goal, another for vehicle repairs, and one for medical expenses. Having a specific purpose to save money towards helps make it a little easier to do, instead of just putting it into a general savings account.Set up automatic transfers to savings accounts when you get paid, or ask for part of your paycheck to go straight to savings. Automatic savings deposits are an easy way to help you get in the habit of saving each month and taking care of your future self.
- Be content
Being content is a huge part of developing healthier financial habits. If you’re happy with what you’ve got, impulse spending and going into debt will likely be less of a temptation for you. Instead, you can have the freedom to save for financial goals and be okay with waiting until you can truly afford something. There’s a difference between working towards financial goals and not being content, and recognizing that difference is vital.