Establishing Good Financial Habits
Good financial habits may take years to develop but being responsible in your spending is worth the effort. Protect your financial future by saving early, living within your means, and following some of these tips we’ve compiled for you.
Live Within Or Beneath Your Means
This is the foundation of all good financial habits. When you spend less than you take in, you are going to retain more money and build up your savings faster. This will help with budgeting and saving for future goals. One easy way to spend less is by cutting back on restaurant meals; start buying groceries and planning meals. You’ll be surprised to see how much money you save. Another tip is to use the 72 Hour Rule to better control your impulse buying. If you see something you don’t know if you want or need, wait 72 hours; if it’s still on your mind and it’s within your budget, allow yourself to get it. Making small spending cuts here and there will make a huge difference in the long run.
Pay Bills Wisely
As soon as you receive a bill or statement, review it to identify and correct any potential errors. Although errors don’t happen often, it’s better to be ahead of any potential issues rather than waiting until the last minute. Also, upon receipt, make a note of the due date and attempt to pay it at least a week in advance. Not only will this habit improve your credit score, but it will also relieve some monthly stress. Another way to be wise with bills is to pay more than the minimum balance on debt payments if you can afford to do so. This will reduce the interest accrued and help you pay down debt faster. When you develop good financial habits, the road to being debt-free seems more achievable and monthly bills aren’t nearly as stressful.
Build An Emergency Fund
Unexpected expenses, like a car repair or medical expense, come at the most inconvenient times. Be prepared by setting up a savings account that you deposit a little bit of each paycheck into. Once money starts building up, don’t withdraw for anything other than an emergency. Generally, you want to have three to six months’ worth of living expenses, just in case you can’t work. Whenever you take money out, or at the very least once a year, replenish the account. Next time there is an emergency expense, you won’t have to worry about how to pay for it.
Create A Household Budget
A budget is a wonderful tool for many reasons. First, it puts a tangible number to how much you can spend on certain things, as well as define areas you should cut back on. Next, a budget makes it easier to save for specific goals, such as a vacation or a new house. When you build a goal into a budget, you can set money aside, guilt-free, and just watch it grow. You should not touch this money for anything else other than an emergency; you’ll reach your goal faster. Lastly, a budget allows you to track exactly where your money is going. Use your budget to reconcile your checkbook at the end of each month to make sure you aren’t bouncing checks. Also, use it to make sure there aren’t any mistakes in your account statements. Budgeting leads to better organization and financial clarity, as well as better spending habits.
Set Your Paycheck To Direct Deposit
Not only is direct deposit safer than carrying around a paycheck, but it’s also faster because you avoid making an extra trip to your bank. The concept “out of sight, out of mind” applies as another reason direct depositing checks is safer. If you aren’t physically seeing your paycheck, you almost forget about the sudden influx of cash and avoid a payday splurge. Direct deposit makes sticking to a budget easier because you can plan based on how much you know is going to be added to your account and when. Being able to split up to which accounts your paycheck goes to is yet another benefit. This is the best way to build up your savings and emergency fund because the money automatically gets deposited.
Open An Automated Retirement Plan
You are never too young to start saving for retirement. The sooner you start, the more money you will have to complete your goals during your golden years. A lot of times, retirement plans through your work include some level of matching; we recommend starting to contribute as soon as you are eligible. If your employer doesn’t offer a retirement plan, there are other individual savings accounts you can start, such as an IRA. Each account will accrue interest, so the earlier you start, the more your money will grow and the more achievable your financial goals will be. You are never too young to start saving for retirement. The sooner you start, the more money you will have to complete your goals during your golden years. A lot of times, retirement plans through your work include some level of matching; we recommend starting to contribute as soon as you are eligible. If your employer doesn’t offer a retirement plan, there are other individual savings accounts you can start, such as an IRA. Each account will accrue interest, so the earlier you start, the more your money will grow and the more achievable your financial goals will be.
Be Sensitive To Fees
Sometimes fees are so small, you don’t even notice; however, they can pile up very quickly. An area that fees can catch you off guard is within your bank accounts. Some accounts have minimum balances you must maintain, or a limit of transactions you can complete in a certain amount of time. Be mindful of these and be very careful to not overdraft your account. Those fees will pile up, and you’ll be out a significant amount of money, depending on the situation. Another situation fees can surprise you is when you choose an ATM. Some charge a substantial fee, so consider going a little farther, especially if you’re making a small withdrawal. You might even find a No-Fee ATM. Unfortunately, there are some fees that cannot be avoided, such as a monthly maintenance fee, so make sure you are aware of and prepared for them.
Avoid Using Credit Cards
Credit cards are one of the top sources of consumer debt in the United States. They are so easy to use and easy to abuse. However, they can be used to build credit if used responsibly. Limit the number of times you use a credit card, maybe even save it for emergencies only. Whenever you do use it, make sure you can pay it off right away. This helps improve your credit score, as well as makes sure you are still living within your means. If you can avoid a balance on your card, interest won’t accrue, and you won’t have to worry about paying minimum balances. Not using credit cards will prevent you from spending more than you can afford. Credit cards are great tools but require strong financial habits in order to keep spending from getting out of hand.
Use Our Financial Education Center
First Bank Financial Centre can help you learn more about handling your finances. The more you know, the easier handling your finances will seem. Our Financial Education Centre is designed to help answer questions and provide you with the tools you need to make informed decisions when it comes to your banking and your future. Please peruse our financial basics and product demos to get a better sense of how the financial world works for you. Learn more in our Financial Education Centre here.
Your habit of a morning coffee may be a good start to your day. A few good financial habits can be the start of a good financial life. Your habit of a morning coffee may be a good start to your day. A few good financial habits can be the start of a good financial life. Contact First Bank Financial Centre to help you get started!