Forming good money habits is harder said than done. It takes an immense amount of discipline and focus. We've all had our fair share of money mistakes. However, only a handful of us has probably learned from these errors.
Mastering your money isn't something that's taught in school. It's base on real life experiences that you can only learn from real life practice. No matter where you are in your financial journey, the adage “It's better late than never” still applies to your finances. If you're dead serious about paying off debt, saving money, and building wealth, master these seven money habits today.
1. Pay Off Debts, Fast
If you're carrying debt, have you ever calculated how much you're paying in interest every single month? Paying off your debts can be the greatest investment you can make. We all know we need to pay it off, but what's the best way?
Although it depends on your unique financial situation, one of the best ways to pay off debt fast is to get a debt consolidation loan. Online companies such as Payoff solely focuses on credit card consolidation loans. You can also check out banks such as Wells Fargo as well. These types of loans can help you fast track your debt payoff journey. You'll have one single monthly payment for a fixed amount of months. You'll know exactly when you'll be debt free and you'll pay less interest over time.
2. Check Bank Statements Regularly
This habit can help you keep track of where your money is going every week. Most of us tend to check it once a month when we get our statements in the mail, however, creating a habit to check it every week will show you where your money went. It can help you adjust your spending habits for the following week to ensure you're not overspending. Being on top of your finances helps you be in control of your money. If you're not checking your balances frequently, this could be a warning signal that you're afraid to face the truth. Tackle your money head on,
3. Don’t Ignore Insurance Costs
No wants to pay for insurance, but let’s face it. It’s a necessity for financial success. But the last thing you want to do is pay more than you have to. Case in point example, it’s estimated consumers are overpaying $368 a year on car insurance alone. That doesn’t include home, health, or life insurance.
That's why it's an important money habit to price check all your insurance costs each year. With advances in technology, it's super easy to do this online or by working with a reliable independent insurance agent who has your back. Imagine being able to save hundreds of dollars a year by just doing a quick search online. There's tons of research on ways to reduce your health insurance costs or finding a better life insurance policy that saves you money. Just do it!
4. Create a Roadmap
Another great money habit I know of to guarantee your success and build wealth is to map out the financial future you want by having a plan. Of course, this includes getting out of debt, saving and investing. But until you have a plan or roadmap, you won't know what you are saving for, and that makes it much harder to do.
Once you have your roadmap, it will be effortless to know what your next most important step is. If you are saving enough but not investing correctly, your plan will show you that. If you aren't making/saving enough your program will tell you that. And if that's the case you get to decide to either cut back on spending, maybe develop a side gig, or perhaps a little of both.
But until you make some plans and projections, it's just impossible to know what to focus on, and that wastes your time and money.
5. Don’t Spend Money to Impress
We've all heard the saying “live within your means.” This is probably the most important advice you can live by. The worst thing you can do is to spend money to impress people that you don't like with money you don't have. We get it; you want to boast how great you are to your peers. Truth be told, they probably don't even care. You're only digging yourself a hole to climb out of later.
Living beyond your means is a recipe for disaster. You'll quickly realize you're spending money on purchases that aren't benefiting you in any way. The opportunity cost is even greater. The money you're spending can be put into ETFs, mutual funds, or even stocks to help you build wealth.
6. Automate Your Savings & Investing
Most of us know we need to save more money, but here’s what ends up happening instead: we pay our rent/mortgage, then we make a car payment, we buy groceries, go out to eat, buy a new gadget, order some stuff on Amazon, and by the end of the month the bills come due.
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Before you know it, that 10% of your paycheck you had promised yourself you would start saving is long gone. All you can do is stare at what’s left of your paycheck and promise yourself you’ll save 10% next month, only to have the whole cycle repeat itself.
This is the classic case of the backward budget – instead of paying our future selves first, we pay her last, and guess what – she never gets paid! The way to solve this classic problem is by using automation to manage your savings and investing. Set up automatic withdrawals to move a percentage of every paycheck to a separate savings or brokerage account – as soon as your paycheck arrives. You never touch the money, and so you never have a chance to spend it.
There are plenty of instructions online that show you different ways to do this depending on your specific needs. But if the DIY route seems like too much hassle, you can also use an app like Digit or Acorns that automatically force you to pay yourself first.
7. Learn what you don’t understand
Often, consumers don’t take the time to educate themselves until something bad happens. Their credit score tanked, but they didn’t realize it until they got rejected for a car loan. They scramble to improve their credit as quickly as possible, without taking the time to understand why. To avoid paying broker fees, Lenda or LendingTree is a great place to start. Make it a point to devour books, podcasts, and talk to others who are willing to share their experiences and learnings with you.
If you're able to master these seven money habits, you'll quickly find yourself on a better path towards financial freedom. No matter where you are on the journey, always stay focused and determined. Building wealth won't happen overnight, but one thing for sure is that it'll eventually happen if you stick to these seven money habits.