Establishing Good Financial Habits
Money is a necessary means to achieve many of your goals in life. Whether you want to go to college, buy a new car or build a new home—having the proper finances will help you reach your objectives.
Building good financial practices is the path to ensure you’ll have the money you need, when you need it. Here are ten good behaviors that you can adopt—with regular practice and repetition; they will become the habits you need to ensure a sound financial future.
- Make sure your financial information and records are organized. Start a file, and include such things as bank statements, bills and receipts, loan information and tax records. Knowing where important financial information is located will save you time and aggravation.
- Prepare a budget. This will help you identify potential areas for reducing expenses and ensure you know where your money is being spent. Any money left over can be saved!
- Have your paycheck direct deposited into your checking or savings account. You’ll have your money quicker and will eliminate unnecessary trips to the bank.
- Arrange for a portion of your pay to be saved automatically through your bank or employer. You can’t spend what you don’t have, and in a while you’ll be well on your way to saving for that car, home or vacation.
- If you have a job and your employer offers a retirement plan like a 401k, sign up! You may think retirement is too far in the future to worry about, but if so, you should think again. With the power of compound interest, saving just a little will really add up—and since the money is taken out of your paycheck pre-tax, you probably won’t even miss it. Plus, many employers offer matching contributions, so you’re missing out on free money if you don’t participate.
- Prepare a personal balance sheet periodically. Having a current snapshot of your net worth is a good way to keep yourself on track financially and can be handy when you are considering applying for a loan. Over time, you will be able to monitor your progress toward your long term financial goals.
- Reconcile your checking account regularly. Sign up for online banking for the convenience of 24/7 access, and get banking alerts to receive important account information. Monitoring your account helps prevent overdraft fees and the embarrassment of bounced checks.
- Pay your bills online. It’s easy, and you won’t have to worry about stamps or driving to the post office to send those last minute checks. If you have regular monthly payments like an auto or student loan, you can choose to send recurring payments and your bills will be paid automatically on the day of the month you specify. Think of all the money you’ll save in late payment fees!
- Try to pay the maximum amount you can afford on your credit cards each month. Making only the minimum payment due will cost you more in interest, and it will take much longer to pay off the balance. If possible, pay the balance in full each month.
For example, paying just $25 a month on a credit card with a balance of $3,000 and an APR of 17%, will cost you $2,241 in interest and will take you 10.5 years to pay off your balance in full! To avoid unruly balances, use a debit card instead to pay for everyday expenses, and buy only what you can truly afford.
- Learn more about handling your finances. The more you know, the easier handling your finances will seem. There’s a wealth of information online, in the newspaper and on television.
Practice these tips, and as you progress – add a few of your own. Soon you’ll discover that good financial habits are one key to a happier, healthier life overall.