Establishing good financial habits
To meet your goals in life, it's helpful to adopt positive behaviors with your money. With regular practice and repetition, the following 10 habits can guide you toward a sound financial future.
1. Organize your financial information and records
Start a file for bank statements, bills, receipts, loans and tax records. Or go paperless with online banking to access all your account history. Knowing where important financial information is located will save you time and aggravation.
2. Prepare a budget
A well-defined budget suited to your specific needs will help you identify potential areas for reducing expenses. Once you know where your money is being spent, any money left over can be saved.
3. Take advantage of direct deposit
Receive your money quicker by having your employer directly deposit your paycheck into your checking or savings account. You'll eliminate worrying about lost checks, waiting in line to make deposits, or delays if you're on vacation or out of town.
4. Set up an automatic draft into savings
Arrange for a portion of your pay to be put in your savings account automatically through your bank or employer. You can't spend what you don't have available in your checking account, and you'll be on your way to saving for that vacation, car or home.
5. Participate in your employer's 401(k) program
If your employer offers a retirement plan like a 401(k), sign up! With the power of compound interest, saving just a little will really add up—and because the money is taken out of your paycheck pre-tax, you probably won't even miss it. Many employers offer matching contributions, so you're missing out on free money if you don't participate.
6. Prepare a personal balance sheet
Having a current snapshot of your net worth is a good way to keep yourself on track financially, and can be handy when you're considering applying for a loan. Over time, you'll be able to monitor your progress toward your long-term financial goals.
7. Balance your checking account regularly
Monitoring your account helps prevent overdraft fees and the embarrassment of bounced checks. To help know how much you have at all times, sign up for online banking. Set up alerts to receive important balance information.
8. 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 set up recurring payments and they'll be paid automatically on the day of the month you choose.
9. 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. For example, paying just $25 a month on a credit card with a balance of $3,000 and an annual percentage rate of 17% will cost you $2,241 in interest and will take you 10.5 years to pay off your balance in full!
If possible, pay the balance in full each month. To avoid unruly balances, use a debit card instead to pay for everyday expenses, and buy only what you can truly afford.
10. Check your credit score
Your credit score and history are vital to your overall financial well-being. Keeping an eye on both will help you better understand your credit. All three credit bureaus—Equifax, Experian and TransUnion—allow you to check your score for free, once every 12 months. Simply visit FreeCreditScore.com (opens in a new tab).
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