Developing healthy money habits can be a challenge. It’s kind of like those fitness goals we set for ourselves every January. But, without healthy money habits, you will never reach your financial goals.
Financial Stress Impacts Your Physical and Mental Health
Staying healthy is probably at the top of your bucket list. But what about your financial health? Recently several articles have discussed the impact of financial stress on your physical and mental health. Probably this comes as no surprise to you. When you are worrying about how to pay the bills, you lose sleep at night. You become anxious, short-tempered, or lose your appetite. How do you get back in shape? Change your habits.
Now is a good time to take an honest look at the progress you have made toward your financial goals.
- Have you saved as much as you wanted?
- Are you on target with your debt reduction goals?
- Have you improved your credit score?
If the answer is no to these questions, it could be that your money habits are hurting you.
Here are 10 Healthy Money Habits
Create a Budget and Stick to it.
Creating a budget is as important to your fiscal health as an architectural drawing is to the stability of a building. Your budget should include your actual income, fixed expenses, and fluctuating expenses.
A realistic budget will bring you face-to-face with your money situation. Among all the healthy money habits you can acquire, creating and sticking to a budget is the most important.
Don’t treat your budget like that treadmill you bought in January. Use it. Check your progress at least twice a year and make any necessary adjustments.
Track Your Spending
Your budget expense category will not be accurate if you don’t have any idea where your money is going. Recurring bills are easy to track. But keeping track of your out-of-pocket expenditures is more of a challenge.
Financial apps can help you track your money. If you prefer to be more hands-on, be sure to always take the receipts, and store them in a safe place. Commit to a designated time each week to record that week’s expenses. You might be shocked to find out how much you spend each week on coffee, carry-out, entertainment, and other non-essentials.
Automate Your Savings
The best way to reach your savings goal is to automate your savings. If you don’t see the money, you won’t be tempted to use it for other purposes. Your budget will tell you how much you can afford to put into your savings accounts each month. Use apps to help you transfer that money directly to your savings accounts.
Pay Your Bills on Time
We have busy lives. Add to that the fact that most of us hate paying bills. Automating your bills can help you overcome this bad habit. If you prefer to handle the payments yourself, set up alerts in your calendar or smartphone. Your credit score will be harmed if you have a consistent habit of always paying your bills late.
Check Your Credit Report
Your credit score impacts just about every facet of your life. If you want a credit card, they’re going to check your credit score. If you need a loan or any other kind of financing, your credit score is going to be the deciding factor. Potential employers and landlords may check your credit score. The common theme is that they all want to know if you are a good credit risk. Your financial health can be seen as a measure of how responsible you are, a factor that is important to a landlord or potential employer.
If you don’t know what’s on your credit report, you could find yourself facing a disappointing rejection, in addition to a hit on your credit score. You are entitled to one free credit report from each of the reporting agencies.
Pay Yourself First
Pay yourself first means that before you do anything else, you funnel your money into your savings accounts. If you have a lot of debt, then paying yourself first also means putting your money toward debt reduction. Many consumers put what’s leftover into savings. You want to change this habit. Pay yourself first.
Kick the Impulse Buying
Spontaneous buying is one bad money habit you want to kick out the door. This is especially important if you are using your credit cards to pay for stuff you can’t afford. Plan in advance what you need to purchase. Shop around and always go with a list. Consolidate your trips so you have less opportunity to be tempted by the sales racks.
Pay with Cash
Credit card debt is the second-largest debt facing consumers today. It’s so easy to charge it. Chief among your healthy money habits should be changing this dynamic.
Using your credit cards can improve your credit score, but only if you pay the balance in full and on time each month. Carrying balances on your credit card can hurt your credit score. And you might find yourself in a never-ending debt story. Make it a habit to use cash or your debit card as much as possible.