5 great financial habits that pay off

October 26th, 2012 Teri Keenan

When it comes to money and finances, we all develop habits. Unfortunately, we often develop habits that aren’t financially sound – spending lots of money, impulse shopping, over-using credit cards, not saving, and many others.

To avoid getting locked in to bad habits, it’s a lot better to set-up some good habits and stick to them. Over the long haul, you’ll do much better financially, and you’ll be a lot happier and more confident. Take a few minutes and read about five of the best habits when it comes to money.

1. Save, save, save! 

You’ve probably heard time and time again the phrase “Pay yourself first.” It truly should be one of your highest priorities. The best way is to pay automatically into your savings account every paycheck. That way, it happens every time, and you aren’t prone to forget. Have at least 5 percent of your paycheck automatically deposited or transferred into your savings account.

2. Create a realistic budget and stick to it. 

Too many people don’t control their spending at all – mainly because they don’t have a budget they follow. Instead, they simply buy whatever they want until they run out of money, and live paycheck to paycheck. Not good.

Instead, create a monthly budget that keeps your spending less than your earnings. You can set up a variety of categories, such as savings, housing, utilities, entertainment, clothing, gas, loan payments and so on.

By knowing what your expenses are, you can control them better. The most important thing of all is to stick to the budgeted amounts, especially for discretionary items, such as entertainment and clothing. If you maintain your budget, you’ll routinely earn more than you spend – and that’s a key to financial happiness.

3. Plan for retirement.

Retirement can be a wonderful part of your life – as long as you’re financially where you want to be. The way to get there is to start saving for retirement as early as possible. If your company offers a retirement plan, such as a 401K or Simple IRA, be sure to sign up and participate. Plus, consider other personal options such as a regular or Roth IRA. The more money you save for your retirement, the more you’ll love your retirement years!

4. Don’t be an “impulse spender.” 

A lot of people make buying decisions almost instantly. They see something – either in stores or online – and then immediately decide to buy it, without even thinking it through. The problem is this often leads to spending way too much money. Plus, it can crash your budget if you have one set up.

Instead, spend some real time thinking about every purchase, checking your budget, and pre-planning what you need and want to buy. Another good technique for avoiding “impulse spending” is to pay with cash. Paying with cash makes you much more sensitive to how much you’re spending versus just putting it on plastic with a credit card.

5. Pay off credit card balances monthly.

Credit cards are an excellent financial tool. But they can also be one of the worst financial mistakes.

If you pay off the full balance every month, you don’t pay interest, don’t overspend, and don’t damage your credit score. But if you let the balance grow every month, it ends up costing you a lot more, you tend to spend too much, and it can have a serious impact on your credit history. So feel free to use a credit card to make purchases, but demand from yourself that you keep track of what your current balance is, and pay it off every month.

The more you make these five financial strategies real lifetime habits, the faster you’ll achieve your financial goals and enjoy more security and confidence. Write them down on a list, carry it with you, and remind yourself every day to follow them. It will create another wonderful habit – smiling every day!

Teri Keenan

About the author

Teri Keenan is Consumer Lending Officer at MidWestOne Bank. She works in the retail department, specializing in training of policy and procedures for Consumer Lending.

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