The best financial habit to start

It seems like the word ‘habit’ usually has a negative connotation to it. We tend to hear mostly about bad habits, like smoking or eating poorly. However, there are many good habits, too, that we hear less about. This is especially true when it relates to money. It’s just as important to create good financial habits as it is to exercise and eat healthy. Here is the best financial habit to start now.

Pay yourself firstmake savings a habit

Have you ever heard that you should save whatever you have left at the end of the month? That’s actually a backwards way of looking at it in my opinion. Whenever possible you should pay yourself first, meaning save money – as long as you’re not shorting any of your necessary bills/expenses. This ensures that you are saving instead of spending extra money.

Create a budget

To figure out how much you can afford to set aside, create a spending plan or budget first. Then, save as much as possible and stick to your budget. Once you know the amount you can save, set it up for an automatic deposit into a separate savings account. You’re less likely to dip into that account if you don’t have easy access to it. For more budgeting tips, read The secret to starting a budget and Managing your budget with the envelope system.

Prepare for financial emergencies

Almost half of Americans can’t afford a $400 emergency and that is scary. Why? Because that means they don’t have enough money in savings for a rainy day. And a financial crisis usually leads to relying on credit cards and building up debt, making it tough to keep up on bills. Not to mention the stress that’s created. The point here is save, save, save because you never know what’s going to come up in the future.

Save for retirement

When you’re younger thinking about retirement savings is usually not high on the priority list. However, the younger you start the better off you’ll be. If your employer offers a 401k or 403b sign up! And even better, if they offer matching payments, take full advantage asap.This goes right along with paying yourself first because it’s automatic each month.

Watch it all grow

Only use your emergency savings for actual emergencies. If you drain your financial safety net for something you don’t really need, you’re not using your money correctly. Also, for many people it’s an odd feeling seeing money grow in an account somewhere and not touching it.

We all have to get rid of the notion that when we have money we can &/or should spend it. The smartest financial minds do the opposite: they save and invest extra money.

So avoid the temptation of needing to spend every time you get a little extra money, especially around tax time. Don’t cut out the fun stuff completely; just be smarter and save more.

 

If you don’t think you have any extra money to save because credit cards are dragging down your finances, give us a call at 888.577.2227 for your free financial counseling session or click to GET STARTED ONLINE. We provide the necessary tools and resources to achieve your financial goals and conquer your debt for good.

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Posted in Emergency Savings, Financial Wellness, Retirement, Savings

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