A Guide on Better Money Habits
It takes more than earning a lot of money to keep yourself financially stable. You also need to monitor your spending as well. If you spend as fast and as much as you earn, you will be strapped for cash during moments when you need it. Unfortunately, the commercial sector makes it very easy to spend money. People end up losing money without realizing it because of their bad habits. In this article, we will go over better money habits you need to adopt.
- Better Money Habits – The Basics
- Better Money Habits – Middle School Lesson to Retirements
- Other Money Tips
Better Money Habits – The Basics
The first step would be to weed out bad habits first. That means, knowing how to budget, save, and work toward your financial goals. As you might suspect, this change does not happen overnight. With conscious decisions and actions, you can root out bad habits eventually.
The first and biggest mistake people make is to rack up debt. It might seem tempting to pay a little bit of money now and pay in small chunks in the future. At a glance, it is only a small amount of money, but that is how they get you. If you add the numbers together, you realize that you pay a lot more in interest compared to paying for the whole thing upfront.
Some credit cards have a high interest, which can cost you a lot of money alone for that. Having a high balance on your credit card can hurt your credit score. So, one better money habit/healthy credit habit is to keep the debt to a minimum. It is better to save up or wait for a sale to buy whatever it is you want in one go. Clear your debt as soon as you can.
Another big problem is finding entertainment in shopping. Window shopping can be fun, but a lot of people turn to buy things online. They just buy things for the sake of buying things. They do not need those shiny trinkets. You can rack up a lot of debt this way as well. The key then is to keep yourself busy doing other exciting and productive things.
Along the same vein is impulse purchases. The trick is to offer you a small purchase just when you are checking out. Again, one instance does not cost much, but the number adds up quickly over time. Another bad shopping habit would be to shop for status. Some people buy things just to impress others. However, this is not a healthy or real way to form meaningful friendships. If anything, it will only lead to financial disaster.
Also read: Types of debt
Better Money Habits – Middle School Lesson to Retirements
Below, we will discuss some better money habits. Retirement, high school, etc. It does not matter. It is good to start building these habits as early as possible.
The first and most important habit to get into would be budgeting. Determine how much money do you spend roughly in a month on necessities and give yourself a small room for other niceties. Certain expenses are fixed and predictable whereas others are not. So, add in some cash as a buffer just in case your estimation is off. The rest, you save up for a rainy day. Budgeting is easier than ever. There are tons of budgeting tools and methods out there. Experiment and see what works best for you. The key to a successful budget relies on the right method that suits you.
Alongside budgeting, you need to learn to live below your means. In other words, you need to be frugal and differentiate between needs and wants. The idea is simple. Buy only the things you need. But a lot of people confuse the two and justify buying something they want because they “need” it.
In this day and age, you can easily automate certain payments. Most banks should offer you some features that allow you to pay bills automatically on time. You can also set up a way to move your money into your savings accounts automatically. However, there are cases where the billing is changed but the automated payment is not, which can cause some problems down the line. So, just make sure to review your finances regularly.
Which financial services company do you associate with better money habits? Insurance. It might seem like throwing away your money, but having the right insurance can cover your assets and income. One bad day can really cost you a lot of money, and insurance can absorb a lot of the impact. The type of insurance depends on personal situation. Just make sure that the insurance company is reputable and make sure to read the fine prints. That way, you have a clear idea of what the company would cover.
By practicing the above, you should have some money saved up. What do you do with it? You can do two main things. The first is to build up your emergency funds to cover unexpected expenses. That could be a hospital visit, a broken-down car, or getting laid off. Make sure to have enough money to cover necessary living expenses for at least six months. If you do not know how much money to set aside for this, start with $1,000 and work your way up from there.
The second thing to do with the extra cash would be to reinvest. There are a couple of things you can do with it. If you are in a 401k, you can try to increase the deductions as much as possible. This means putting as much money into the program, and it might seem like a bad idea. But the thing is, you are securing your retirement funds and also reducing your taxable income. So, increase it as much as your employer will match.
But if you still have some money left over, you can put it into other ventures. That could be investing money into stocks, or trying out trading stocks or forex for yourself. If you are interested in trading, you can check out our One Core course on trading. Our proven trading system is effective in any market and many traders came to us as their last stop for trading education. From there, they go on to make decent gains just by trading.
But if you barely have any money left and want to make money quickly, maybe investment or trading might not be for you. The reason is that people tend to take high-risk low-probability positions, so they end up losing what little money they have. Instead, a better investment would be to invest in building up your skillset so you can secure a better-paying job. Only consider investing in stocks as a means to build a good habit of saving money.
Also read: Types of Interest
Other Money Tips
There are many more ways to keep your finances in check. Some people go the extra mile to track every single spending to stay so they know where all their money went. If you can put up with the hassle, you would have a crystal-clear idea of your spending and come up with ways to cut down on your expenses. One of the biggest expenses would be subscriptions. They are small on paper, but they add up over time. Cancel subscriptions that you do not need. Ditch the cable as well.
This is not an exhaustive list. If you do a little bit of digging, you may find a money habits blog that goes over other unique ways to save money. Bank of America also offers resources on better money habits, Spanish and English. Try all the solutions if you can and see what work best for you.
They have a set of questionnaires to access your financial situation, goal, and provide you with a comprehensive better money habit high school lesson to retirement tips. Depending on your location, the lessons you get from them may not be accurate, but they give you an idea of what to expect going forward.
Having a financial plan is important since you know where you are heading. With the guidance from Bank of America, you can apply the information to your situation. Then, you can map out your goals and have an idea of how you can achieve them. Maybe you are working out how you can buy a house within the next ten years, or saving up to start a family.
You have to have a financial plan. Otherwise, you end up never having enough money for anything. Your financial plan should include both short- and long-term goals. A short-term goal would be something like a vacation whereas a long-term goal is paying off your mortgage.
At the end of the day, the only way to know for sure if any of the above is effective for you would be to give all of these better money habits a try. It can be difficult to make a complete 180 to your spending habits, and that is not a good way to turn your life around. Instead, try doing it in a piecemeal fashion. Start small and go about it at your own pace.
Also read: Forex trading in usa