7 Good Financial Habits to Master

Many of us have bad habits that can harm our finances without us realizing it. If you eat out often, make impulse purchases, or only make minimum payments on your credit cards, you could be putting your finances at risk. To improve your finances and avoid eventually needing debt relief, it’s critical to develop good financial habits.

The good news is that this doesn’t have to be a difficult process. Small moves add up and you’ll be surprised how quickly you can change a habit. Here are seven simple ways to start putting yourself on a path to financial security.

1. Live Within Your Means

This is the most crucial of all good financial habits! If you’re consistently spending more than you earn, you will be living paycheck to paycheck forever. Figure out your monthly income and spending and use these numbers to make a budget.

Don't make the mistake of assuming that a budget is restrictive; on the contrary, a budget shows you when it's safe to spend money on the fun parts of life while helping you prioritize your needs.

And don't make the mistake of using credit cards to expand your pocketbook. A credit card is essentially a loan, and if you have to take out a loan to make a purchase, you can’t actually afford it.

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2. Schedule a Regular Financial Check-in

It’s hard to know what your habits are if you’re not keeping track of your accounts. It's a good idea to schedule a regular, recurring check-in time with your finances so you can keep tabs on every money move you make.

Ideally, you should check your credit score and credit reports at least once a quarter, and your checking account balance and transactions a few times a week. You can likely access your credit score via a bank or credit card company you already do business with. You can get your credit reports (one from each of the three major consumer credit bureaus) from AnnualCreditReport.com.

If daily check-ins are too intimidating at first, try once a week to start. Once you get more comfortable tracking your money moves, see if you can make that financial check-in more frequently. Notice a recurring expense for a service you don’t really use? Cancel it and pat yourself on the back.

3. Make Your Savings Automatic

Every time you get paid, set aside a portion of your paycheck to automatically go directly into savings. If you get direct deposit from your employer, you can set this up through them. Otherwise, you can set up an automatic transfer with your bank.

If you think your budget can handle it, try to put 10% of every paycheck into savings. If that’s too much to handle, that’s OK. Even a small amount, say $10 a paycheck, will start to add up over time. As your savings grow, see if you can bump up the amount you’re putting in and allow it to grow even faster. Challenging yourself to save just one percentage point more per paycheck every year can lead to greater financial security, as you'll have more money available to handle an unplanned or emergency expense. And if you get extra money during the year (such as a holiday bonus or even a pay raise), bank the extra cash.

Where should you keep your savings? A high-yield savings account will pay you a higher interest rate on your banked cash, so explore your options—right now, you could earn around 4% APY on your money in a HYSA.

4. Re-Evaluate Your Spending Habits

Take stock of your expenses by tracking what you spend for a couple weeks. Cancel subscriptions you don’t use, cut back on restaurant meals, and start packing leftovers for the next day’s lunch every night before bed.

Shop thrift stores and look for big purchases like home appliances used on Craigslist before buying new. Just because something is used doesn’t mean it isn’t still useful, valuable, and beautiful. A savvy shopper with good financial habits will soon learn how to never pay full price for anything.

5. Learn to Say “No” to Yourself

Making impulse purchases can get you intro money trouble. You’re in charge, though, and can train yourself to say “no” to these kinds of purchases. Always shop with a list of what you need and stick to that list. Build in a buffer of consideration before you make any purchase.

If you’re in a store and see something you want, but don’t actually need, challenge yourself to resist putting it in your cart for 15 minutes. You might be able to walk right out of the store with the desired item dissipating from your memory. When browsing online, step away and forget about the item for at least 24 hours. Pushing yourself to stop and think can go a long way toward ensuring your purchases are sound and don't end up harming your finances.

6. Set Reminders or Autopay

Late fees can rack up unnecessary debt very quickly. Avoid compounding your debt by setting calendar reminders to pay your recurring bills. Even better, link your bill accounts to your bank account or debit card by setting up autopay.

Autopay is great because it allows you to just “set it and forget it,” and never pay another late fee again. Just always make sure you have sufficient funds in the account you’re paying from, or else you could get charged overdraft fees from your bank.

7. Read Financial Advice

There’s a plethora of great financial advice out there if you just take the time to look. Do some research and find more personal finance blogs to read (start with ours) and podcasts to listen to. Your local library likely offers books about broad personal finance and about specific topics. Find one or two that speak to you and check out what they have to say.

The impact of these good financial habits won’t happen overnight, but if you stick with them, the effects will snowball overtime. Seeing results can be a great encouragement to keep going, and the more good financial habits you integrate into your life, the faster you will see those results.