Building good financial practices is the path to ensure you’ll have the money you need, when you need it. Here are ten good behaviours that you can adopt, with regular practice and repetition; they will become the habits you need to ensure a sound financial future.
1. Make sure your financial information and records are organized. Start a file, and include such things as bank statements, bills and receipts, loan information and tax records. Knowing where important financial information is located will save you time and aggravation.
2. Prepare a budget. This will help you identify potential areas for reducing expenses and ensure you know where your money is being spent. Any money left over can be saved!
3. Have your income direct deposited into your checking or savings account. You’ll have your money quicker and will eliminate unnecessary trips to the bank.
4. Arrange for a portion of your pay to be saved automatically through your bank or employer. You can’t spend what you don’t have, and in a while you’ll be well on your way to saving for that car, home or vacation.
5. If you have a job and your employer offers a retirement plan like a 401k, sign up! You may think retirement is too far in the future to worry about, but if so, you should think again. With the power of compound interest, saving just a little will really add up and since the money is taken out of your pay check pre-tax, you probably won’t even miss it. Plus, many employers offer matching contributions, so you’re missing out on free money if you don’t participate.
6. Prepare family and personal balance sheet periodically. Having a current snapshot of your net worth is a good way to keep yourself on track financially and can be handy when you are considering applying for a loan. Over time, you will be able to monitor your progress toward your long term financial goals.
7. Reconcile your checking account regularly. Sign up for online banking for the convenience of 24/7 access, and get banking alerts to receive important account information. Monitoring your account helps prevent overdraft fees and the embarrassment of bounced checks.
8. Pay your bills online. It’s easy, and you won’t have to worry about stamps or driving to the post office to send those last minute checks. If you have regular monthly payments like an auto or student loan, you can choose to send recurring payments and your bills will be paid automatically on the day of the month you specify. Think of all the money you’ll save in late payment fees.
9. Try to pay the maximum amount you can afford on your credit cards each month. Making only the minimum payment due will cost you more in interest, and it will take much longer to pay off the balance. If possible, pay the balance in full each month. To avoid unruly balances, use a debit card instead to pay for everyday expenses, and buy only what you can truly afford.
10. Learn more about handling your finances. The more you know the easier handling your finances will seem. There’s a wealth of information online, in the newspaper and on television.
Practice these tips, and as you progress, add a few of your own. Soon you’ll discover that good financial habits are one key to a happier, healthier life overall and “fat and happy” family piggy bank.
The best way to make managing your money seem like a natural extension of the rest of your life is to make it habitual, a regular part of your routine. That's true whether we're talking about paying all your bills on time, keeping track of your expenses, or having regular money discussions with your spouse.
But how do you do that? If you've ever tried to adopt a new habit then you know: Some stick but some vanish as soon as the next sun rises.
Study after study shows that you have to have patience. On average it takes 21 days for a daily behaviour to become a habit. A weekly or monthly behaviour takes even longer. The difference between successful attempts and failures is that people who are successful do the following:
Keep a record.
For new habits, a daily journal is the best medicine, the aim is to document your progress and record even the tiniest improvements. You could also find Spending Tracker, another tool for good financial habits.
Organize your environment to help, not hinder.
You want to keep things nearby that will help you reach your goals, and keep temptations as far away as possible. That may mean leaving your credit cards in a drawer at home if you can't think of a reason you'd need them that day. It also means setting up mechanisms to make your accomplishments come easier. For example, if you're trying to stick with a budget, keep a Post-It note on your pillow to remind yourself at the end of the day to enter your expenses in the Spending Tracker.
Don't set yourself up for a fall.
You can make tedious tasks nearly effortless. If you've hated research since the time you were young, you're probably not going to love spending hours online researching stocks. Don't fight this reluctance: Go with it. Instead of forcing yourself to pick a new stock or fund every time you have a few dollars to invest, schedule automatic monthly withdrawals from your checking account, and have the money deposited into a mutual fund that you can stick with for the long term. Likewise, if balancing your chequebook is what you dread, buy a software program that'll do all the actual figuring for you.
Reward yourself for good behaviour.
Just make sure that your rewards don't work against your ultimate goals. For example, if you're trying to save money, your reward shouldn't be spending an extra $30 at the Gap, it should be something free, like an extra-long soak in the tub. Likewise, don't punish yourself when you experience a setback. Let's just acknowledge right now that it will happen. A friend will come into town for a few days and you'll go on a little Visa bender. Give yourself a break and get back on the plan as soon as you can.
Seek out support.
Often, working with another person, or group of people, can provide just the boost you need to get with the plan. Go to the Message Boards on my site and you'll find people with similar goals and interests who can keep you on the right path through a series of well-tested suggestions. I'll be in the Message Boards, too, answering your questions and offering support.
Keep going, even when you feel down (especially when you feel down).
By actually doing something over and over again, you'll gain a feeling of accomplishment, even power. That's why it's so important that when you find yourself feeling frustrated and overwhelmed by something, you do just what's required to help you conquer the problem. When you're feeling poor, you should sit down with a pad and paper and figure out just how much money your new habits are saving you. Two dollars a day saved by walking to work rather than taking the bus may not sound like much, but it adds more on a yearly basis. Once you write it down, focus on how the accomplishment makes you feel. Concentrating on the change will make you feel energized. Think of it as insurance for how you'll behave tomorrow.
Don't let feelings of self-doubt get in the way. After all, it took time and practice to develop your current habits. It'll take the same time and practice to develop the ones you want to adopt for the future.
