5 Good Money Habits to Boost Your Finances
How you live your life is borne out of habits over time. Staying fit and healthy is a habit; in the same way, saving and investing is a habit. Bad money habits will undoubtedly hold you back from living the best financial life. So, how do you make sure to take control of your finances whenever life gets in the way? The first step is to gradually develop a set of actions to establish a healthy relationship with your money.
5 Simple but Effective Money Tips to Start Today
1. Tackle Debt
Debt is a normal part of life and doesn't necessarily mean a person is bad with money. However, it can quickly spiral out of control, always taking a big chunk of your income. You can consider applying the debt snowball effect as a quick way to get rid of debt. It starts with listing and ranking all your credit card debt and outstanding loans from the smallest to the largest balance. The next step is to undertake paying off the smallest debt amounts until you're done before moving to the next debt. The key is to keep rolling over money allocated to pay the first debt into the next continually until you have a nil balance.
2. Build an Emergency Fund
An emergency fund comes in handy, especially if you're trying to avoid racking up credit card debt to buy your groceries. The extra cash covers any unexpected expenses such as unplanned car repairs or medical costs. It's recommended that you save three to six months of your living expenses. Depending on your income and lifestyle, start with any amount you're comfortable with. This can be as little as $100 and continue building to higher amounts. Since it's for emergencies, the funds have to be quickly accessible. It's advisable to put the money in a high yield savings account or money market fund.
3. Work With a Budget
Bad spending habits steal away your peace of mind. When you're on a budget, you'll be forced to track every dollar you spend when buying your groceries or paying for your monthly subscriptions. Create a budget that works for you and stick to it. You can try any of the multiple budgeting methods, such as a zero-based budget or the 50-30-20 rule. Review your spending every week or month and see if you're reaching your targets.
4. Have Clear Financial Goals
Begin today by spending your money with intention. When you have a clear goal, such as saving for retirement, buying a home, or planning for a holiday, you become actionable.
You can list down both short-term and long-term goals to help you better organize your finances. Let's say your short-term goal is to pay off all your credit card debt in one year. Every single day until year-end, you will try avoiding bad habits that derail your chances of being debt-free. If your long-term goal is to save for retirement, you will slowly become disciplined with your budget as you have envisioned your ideal future life. Saving money is not easy; that's why having an inspiration is important.
5. Invest in Your Health
Your health goes hand in hand with your finances. Poor health limits your ability to earn, save, and invest. It reduces your lifespan, so you can't enjoy the fruits of your hard work. In a 2016 study, it was found that an extra hour of sleep increased wages by 1.5% in the short term and 4.9% in the long term. Enough sleep improves your cognition and memory, which translates to improved productivity and likely better financial decisions.
Give priority to your health needs, such as buying quality and healthy food, signing up for health insurance, or subscribing to a fitness program. This lets you get value for your money. Also, safeguard your mental wellness for a better quality of life. Focusing on your health now insures you against a future of paying exorbitant medical bills after years of poor health habits.
Fix Your Money Habits
Healthy money habits don't happen overnight as you have to break away from bad patterns and preconceived notions about money. However, having a goal in mind and consistently following good spending and saving habits will get you to your desired financial position.
How about automating how you track your expenses? Knowing where your money goes makes sure you can spare extra funds to save and invest. You can try this with our app, which allows you to pay bills without delay and at your convenience.