Only around 57% of the American population is considered financially literate. However, these skills are very beneficial if you want to achieve financial freedom and security. The process may be vast, but monitoring your finances and budgeting are essential steps to start taking. Tools like Simplifi can help you keep your expenditures in check, identify loopholes, and adjust your budget to allow more room for savings and investments. Here are some healthy money habits to start practicing in your daily financial life.
Set Realistic Goals
Setting up goals and committing to them requires tenacity, a positive attitude, and commitment to achieve. However, you only apply the responsibility if your goal is clear, you have a path to follow, and you already have a vision of the destination. To be better, avoid setting generic goals and start making your dreams specific, measurable, achievable, relevant, and timely (S.M.A.R.T.)
Instead of saying, “I want to save money this year,” add more power to the goal and say something like, “I want to save $72,000 within the next 12 months.” That makes the plan more substantial, it's a "healthy money habit", and allows you to break your dream into monthly, weekly, and daily targets, and directs your daily focus and energy towards achieving the vision.
Review and Update your Financial Plans Frequently
Your financial plan is the tool you use to assess, organize, and enhance your current and future fiscal life. This is a key aspect of healthy money habits. While it’s essential, setting an initial plan and sticking to it for a long time will inconvenience your dreams and limit your abilities.
Consider reviewing and adjusting your financial plan at least monthly. Also, find time to revisit any vital financial information at least between three and six months intervals and change it whenever a significant event takes place in your life. These could be when you get a baby, make a big purchase, or receive a salary increment.
Track Your Spending
Tracking expenditures is often one of the most daunting tasks, since you have to be very honest with yourself about your spending. As a result, don’t shy away from auditing yourself as the guilt you sometimes feel is your weapon towards killing a bad habit and developing a better one.
Keep all your daily receipts, credit card statements, and any other expense records and diligently review the day’s expenditure every night. That’s where you’ll realize where you spent unnecessarily and learn how to control the desire next time. Also, go through your family’s expenses and adjust where necessary.
Be Careful with Your Credit Cards
Credit cards are beneficial when you need something but can’t afford it at the moment. However, they bring laxity in spending and may encourage you to spend unnecessarily. A survey by Value Penguin reported that 38.1% of households in the U.S. have credit card debt, with the median debt per person being about $5,700.
The rate is quite alarming considering that most credit card expenses are never significant investments or purchases but stuff you can avoid and still live comfortably. That’s why minimizing credit card debts sets you ahead of poor financial habits.
Evaluate Your Billing Statements
If you give it some of your time, you may realize just how much money goes into your billing statements unnecessarily without notice. Take some time and scrutinize the statement line by line. Note that the sports package that you still pay for monthly despite being out of season. This is one of the important healthy money habits!
Also, check on that gym subscription that deducts your pay even though you no longer use the service. While doing this, you’ll also notice some expenses that you don’t understand and an opportunity to bargain your bills with the company.
Healthy money habits are an essential part of your financial growth. However, it’s not easy to break what has been usual to you and cultivate a new habit to succeed, but it’s possible. Start small and focus on getting better. Also, teach your children about finances and help develop healthy money habits in them early.