10 GREAT MONEY HABITS TO DEVELOP IN YOUR LIFE
They say that “old habits die hard.” However, new research shows it might not take that long to form new ones.
According to a studies it takes an average of 66 days to form deeply rooted habits that stand the test of time. That means the majority of us could change our lives in a little over two months.
Behavior can be changed over time if new habits are performed repeatedly. It’s like digging a groove. The more you do it, the deeper the groove. And the deeper the groove, the harder it will be to get out.
But, like anything else, new habits require initiative and commitment. After all, you can’t form a habit through repetition if you never get started. And sometimes, getting started is the hardest part.
All of the money habits below are good to implement on their own. But, combined? They can change your life for the better, and for good. But they all start with actionable change on your part. And in order to make a change, you have to want to change in the first place.
It’s easy to keep heading the wrong direction — to take the path of least resistance. But with the right attitude and the right game plan, you can begin forming the habits that will help you become rich over time.
So, here are …
10 Good Money Habits — and How You can Make Them Second Nature
Habit #1: Paying your bills on time
This is an excellent habit to form for a few reasons. First, it will save you from paying the unnecessary late fees that result from late payments. And second, it might save you from the higher interest rates charged to those who pay late. Since payment history can make up as much as 35% of your credit score, prompt bill payments should help increase your credit score over time.
How to form this habit: If your bills aren’t organized, it’s a lot easier to pay them late by accident. To form a healthy relationship with your bills, you could consider several strategies, including:
· Pay bills once or twice per month. Consider paying bills on the first and the 15th of the month, depending on when they are due.
· Set bills you worry about on autopay. Bills you are likely to forget can be set on autopay for a certain day of the month.
· Mark due dates on your calendar. Pay bills according to their due dates by marking those dates on your calendar with other important responsibilities and events.
Habit #2: Creating a monthly budget
I’ve written about budgeting multiple times. Please use any type of budget — as long as you use it.
Instead of thinking of your budget as a restriction on your life, try to think of it as a powerful tool — a plan for your money.
How to form this habit: If you opt for a monthly budget, you only have to create one 12 times per year. That’s probably the easiest route to go, and it’s definitely the least time consuming.
Like any other priority, mark your budgeting date and deadline on your calendar near the end of a month — or at the beginning of the next one. Then, sit down and create your monthly budget on that date.
Habit #3: Investing regularly and increasing contributions as you earn more
To build your nest egg over time, you need to invest on a monthly basis at the very least. I would suggest contributing 5% to 10% of your salary at first if you can, and ratcheting it up from there as your income allows.
How to form this habit: If you’re using a work-sponsored 401(k) to save for retirement, setting this on autopilot is easy. All you need to do is contact your employer’s HR department and set up your retirement contributions through payroll deduction. Setting your contributions as a percentage, say 10%, will also automatically increase the amount you contribute over time as you receive promotions or cost of living raises.
If you’re stuck investing for retirement on your own, set a specific date on your calendar to sock money away. If you’re using a monthly budget, and especially a zero-sum budget, make a habit of “paying your investments” as if they were a regular bill.
Habit #4: Tracking your financial progress and net worth
How can you know where you’re going if you don’t know where you’ve been? If you want to gain a true perspective on your financial situation, it’s important to track it over time. Even though your net worth will rise and fall over time with your investments and assets, it should show a gradual upward trajectory.
How to form this habit: This part is easy. By signing up for a money management site like Personal Capital, you can track your net worth in perpetuity for free. All you need to do to get the ball rolling is sign up and add all of your accounts once. The rest is done for you. After that, you can simply log in from time to time to see where you stand.
Habit #5: Make savings a priority
Just like investing, you have to save regularly to build up a savings buffer over time. And no matter whether you’re building an emergency fund, saving for a house, or saving for the future with no specific goal in mind, it’s consistency that will help you reach your goals.
How to form this habit: If you’ve started using a budget, utilize it to help reach your savings goals. Create a line item for “savings” and pay your own savings account as if it were a regular bill. Or, if you want to make it automatic, set your bank account up to automatically withdraw a certain dollar figure on payday or any other day that works.
Habit #6: Stay on the wagon, no matter what
When trying to create a new habit, research has shown that repetition is key. Unfortunately, the opposite is also true — failing to perform the new habit can quickly make you forget it altogether.
If you want to reach your financial goals, it’s important to keep moving full steam ahead — even if you have a bad day, experience a financial mishap, or just feel like giving up.
How to form this habit: While staying on the bandwagon can be a drag, the other tips in this post can help you build the underlying framework that will make it easier. With a monthly budget, for example, one bad day shouldn’t be enough to knock you off track for good. Meanwhile, an automatic savings and investing plan will help you keep saving no matter what.
Habit #7: Keep an eye on your credit health
Although your credit isn’t the end-all-be-all, it is an important component of your overall financial health. In order to get the best interest rates, buy a home, finance a car, or start a business, you’ll need a good credit score and credit history behind you.
How to form this habit: To keep your credit on good standing, you’ll want to explore the habits of people with good credit and emulate them as much as you can. Those habits include things like paying your bills on time, keeping your balances as low as possible, not opening new accounts without good reason, and utilizing different types of credit. Credit Karma can also help you track your score for free, and even offers account alerts when changes are made to your score.
Habit #8: Save on daily, weekly, and monthly purchases
While having a budget is a great way to stay on track, it’s important to keep your expenses as low as possible, too. After all, usual spending can add up over time if you’re not careful, and there are ways to save on everything if you’re willing to put in the effort.
How to form this habit: Saving on everything may seem impossible, but it isn’t nearly as hard as it seems. In fact, it all starts with your small bills — groceries, gas, entertainment, and miscellaneous.
Getting in the habit of price shopping for groceries, for example, can save hundreds of dollars each month. When it comes to your big bills like auto insurance, homeowner’s insurance, and renter’s insurance, set a date each year to shop around for the best deal.
Habit #9: Spending less than you earn
No matter what, the best way to get ahead is to spend less than you earn. I believe spending less than you earn is the No. 1 rule of personal finance.
Spending less than you earn frees up the money you need to make larger payments on your debts. Over time, they begin to disappear, reducing your monthly bills and giving you even more breathing room.
How to form this habit: If you’re following the rest of the tips on this list, this habit will take care of itself. With a monthly budget, an actionable plan to save on all expenses big and small, and an automatic savings plan, you should know what you can truly afford — and have the wherewithal to create a life that fits within those bounds.
Some of the best ways to start spending less than you earn involve cutting expenses:
· Going through all of your bills and cutting out “the extras”
· Diligently tracking your spending
· Taking a closer look at your routines and asking if they still serve you
· Getting a better bank
· Finding ways to save money around your home
Habit #10: Being the CEO of your own life
In today’s complicated world, it’s easy to let life “happen to you.” It’s easy to sit back and let the chips fall where they may. But if you truly want to get ahead, you have to be proactive. You have to set yourself up for success every time; you have to be willing to do the things others just aren’t.
Becoming the CEO of your own life is as simple as owning your triumphs and your failures and realizing that you have the power to change your future.
How to form this habit: To become the best boss you’ve ever had; a mindset change is in order. Instead of reacting to the world around you, take the bull by the horns and do whatever it takes to create a new and better future.
Following every tip in this post will put you in the position to be the best CEO you can be while improving your financial outlook beyond your wildest dreams.
But you have to act, and you have to act consistently until you are in the habit of being in control. Remember, you are the driver of your own life — and you ultimately decide where you’re going.
Remember the Bottom Line
All of these money habits are good to implement on their own. But, combined? They can change your life for the better, and for good. But they all start with actionable change on your part. And in order to make a change, you have to want to change in the first place.
It’s easy to keep heading the wrong direction — to take the path of least resistance. But with the right attitude and the right game plan, you can begin forming the habits that will help you become rich over time.
What financial habits have you implemented in the last year? What bad habits are you trying to drop?