The first step to building healthy financial habits is recognizing the bad ones. Do you spend too much eating out? Are you taking care of your credit by making the appropriate payments on your credit card bill?
Identifying your financial faults will allow you to determine what you need to work on to achieve financial stability and success. Evaluate your finances and recognize the areas you may be overspending and how you may be poor budgeting.
Furthermore, there are healthy habits that you can implement in your life that will not only allow your money to last but grow over time. This includes identifying your saving goals and saying no to the things you want.
Read the following sections to learn how you can build healthy financial habits that will ultimately reflect the health of your bank accounts.
Become Financially Literate
If you want to become successful financially, you must become literate in personal finance. You don’t need to study business or accounting to understand ways in which you can save and invest your money toward your goals.
There are hundreds of personal finance books and personal finance blogs available, like The Automatic Millionaire by David Bache, where you can seek financial advice.
One great book that negates the belief that you have to earn a high income to be wealthy is Robert Kiyosaki’s Rich Dad Poor Dad. Attempt to read at least one personal finance book a year and stay committed to pursuing financial literacy throughout your life.
You can also take a financial literacy class in person or online, attend educational seminars, or simply read finance magazines to broaden your understanding of finance.
Set Specific Saving Goals
While it is important to have an emergency fund and save towards retirement, it is also important to save for specific goals that people usually take out loans for. This may include short-term and long-term goals, like:
- Your children’s college
- Buying a car
- A family vacation
- Cosmetic surgery
- A gadget upgrade
- Purchasing a new home
While you will not be able to satisfy these goals all at once, you can prioritize which ones are more important and work on reaching them. Furthermore, you should define your goals as specifically as possible. This means coming up with a set time frame and dollar amount.
How much should you put away each month to obtain $5,000 in a year? Clearly defining your goals will allow you to stay motivated and confident, giving you the strength to stick to and achieve your financial goals
Use Your Credit Cards Wisely
Poorly using a credit card can negatively impact your credit score, meaning you may not be able to auto finance or lease that car you want. While credit cards can be dangerous, they can also be great tools if you learn how to use them wisely. Many people assume that having a credit card will allow them to buy the things they want.
While it definitely can, it is best to designate your credit card to take care of the things you need so that you know you can pay it off later. Instead of paying directly out-of-pocket for your needs and using your credit card for your wants, use your credit card to pay for essentials, like gas for your car, and then pay off the full balance every month.
A great way to avoid spending with your credit cards is to shop without them. Leave them at home when going to the mall to avoid tempting buys. If you are in credit card debt or have used more than 30 percent of your available credit, commit to paying more than the minimum payment due.
You May Read: 9 Credit Cards Lessons to Follow
Learn When to Say No
It may be hard to say no to yourself when you are out shopping. You may see a pair of shoes that you like and immediately think “I have to get these”. While you can list a few reasons why you want these shoes, you can probably list more as to why you shouldn’t get them.
When put in these tough situations, it is important to think of your goals and how spending on the things you want may not allow you to achieve them. How many times do you find yourself saying “just this one time” or “it’s the weekend, I can have some fun”?
Impulsive buys can also be small, like that iced coffee you get from Starbucks four times this week. These buys add up over time and a regular expense of only $5 can turn into $100 in no time.
Now, this doesn’t mean you can’t treat yourself. You can always set a budget for the miscellaneous things that bring instant happiness to your life.
Obtain an Employer-Sponsored Retirement Plan
The best way to save for your future is to participate in an employer-sponsored retirement plan, also known as 401(k). While the kind of plans offered differs by company, they typically involve having a specific tax-deferred amount deducted from your salary that will grow over your entire career.
Check with your company to see if they offer a matching contribution to your 401(k). Many companies will require that you contribute a certain amount to take advantage of this benefit. If you leave your job for any particular reason, you can withdraw the money or roll it over into a traditional IRA or another employer-sponsored plan.
A traditional IRA does not involve an employer and is a self-directed retirement account. The earlier you start contributing towards your future and adopting these healthy financial habits, the more you will thank yourself later.