This better money habits guide is complete with everything you should start doing right now to set yourself up for financial success. Many of these suggestions can take time and might not be attainable for you right away. But, getting started right now will set you up long-term.
But with hard work and dedication, everything in this list is very possible to do and will become so automatic in your everyday. Ready to build good money habits? These twelve tips below will get you on the right track today.
1. Fix your credit score
Too many people fail to realize what their credit score is or how much it can affect anything you plan to do in the future. Look at your score and start putting a plan in place to fix any issues, improve your number or if your score is good, then keep doing what you are doing.
2. Minimize credit card debt
One the more obvious items on this list, but also absolutely needs to be said is to minimize credit card debt. Credit cards are good for a few things. The problem is, many credit card companies love approving people and then smacking them with 20%+ interest rates.
And your credit card debt comes with a cost. The average household with revolving credit card debt pays $904 in interest annually according to NerdWallet. Yet, people are the problem too. If you can’t afford to pay something in cash or pay something off quickly, don’t charge it.
3. Pay extra on your student loan payments
While the interest might not be as high as say a credit card, you still want to pay these off as soon as possible. Of course, it might be hard to pay more on your student loans, but when you can, do so.
Got a recent raise? Bonus income? Started budgeting and have money leftover? Use it towards your student loans. You can also consider refinancing your debt to help lower the payments.
4. Know your current net worth and keep track
I think this is one of the most important aspects to developing positive money habits, yet is one that many often overlook. Checking out your net worth can be scary. But understanding your net worth helps you keep track of where you are at, what you are spending, and helps you see your progress. Sometimes evaluating your net worth can be hard, but luckily there are simple tools out there to make it easier.
5. Understand all your expenses and review regularly
If you do not know where your money is going and what expenses you have, how are you going to know where to even begin to develop good money habits? Having the full picture in front of you will help you figure out where your money is going and where spending cuts can be made.
Additionally, it is crucial to review this on at least a monthly basis. Bills can change, loans can change, and your salary can increase. There is no limit to how much you should review, but just know how critical it is.
6. Create a savings plan and automate if need
Now that you know your expenses and are reviewing it on a consistent basis, you can truly formulate a unique savings plan. If you feel like you won’t have much self-control or need that to not spend it right away, do it.
Now, before you even see that money in your account for bills or just on unnecessary spending, it’s already automatically transferred to savings, brokerage, or retirement accounts. Boom!
7. Ignore the Joneses
As a society, we try so hard to match or compete on a socio-economic level that we easily set ourselves up for financial disaster. In order to develop better money habits, ignoring the “Joneses” and focus on what you have will help ensure frivolous spending and put money back in your pockets.
It’s hard to do with social media and people’s mindset focused on material things, but once you start ignoring others, it gets easier to save money.
8. Dedicate an hour a week to your finances
To truly have a decent grasp on your finances, you need to dedicate time each week to your money. With anything else, practice is what gets you where you want to be. Reading and talking about finances might not be super exciting all the time, but if you want to develop better money habits, you need to spend time on it.
9. Read money blogs and books
This essentially goes along with the above section, but it should also be its own separate section. If you want to develop positive money habits, reading personal finances blogs and money books will get you there. A majority of people think learning about finances is hard and the media or experts certainly makes it seem that way.
It’s easier than you think, once you started dedicating time to reading. But, there are a ton of great online resources and books that simplify everything and will have you understanding more about money in no time.
10. Increase your savings rate with pay raises
Do you get annual pay raises? Got a recent one? First, congrats! Secondly, what are you doing with that extra money? Whether a small or large raise, you should be smart with that extra money. The majority of people will start buying new things, upgrading a car or their home, etc.
Although I would recommend using anything extra to pay down debt. But if you have a handle on that, then use that money to increase your savings rate.
11. Take advantage of 401ks
To develop better money habits means preparing for the future and retirement. If you work for a company that has a 401k with a company match, you better take full advantage of that.
If you work for yourself, you can open your own 401k. Now, if your company does not have a 401k currently and you don’t have your own business, you can still open up a traditional IRA or Roth IRA. There is no excuse to not prepare for your future!
12. Own up to your financial mistakes
The final piece for improved money habits is you have to own up to any financial mistakes you have made. No matter how bad. If you are in denial or rather ignore the mistakes you are making, you are only setting yourself up for more failure.
Everyone makes mistakes and money mistakes are the easiest to make. But only you can come to terms with your debt, any bad investments, or even if it is just a lack of knowledge. Recognize it. Respect it. And move on to correct it.