Financial Habits that will Change Your Life
When it comes to developing new habits, most of us often get on the New Year’s Resolution train. But when it comes to cultivating good financial habits that will change your life, there’s no bad time.
The best time to start is now.
While I urge you to take up new money habits as quickly as possible, I understand that doing so is not easy. You may have heard the popular concept of it only taking 21 days to form a new habit.
However, if that were true, then all of us would be expert budgeters by now. The time frame in which you form a thoughtful financial mindset will differ for everyone. But my job is to make it easier for you. We all start somewhere. Similarly, all money management habits start with day one. They also require constant work.
So, let’s get to work!
In This Blog
Why Good Financial Habits Matter
Positive financial habits matter because if you are not tracking where your money is going, it can be very easy to lose control of it. Once you lose control of your money, you become more vulnerable to losing control of your life as well.
You might be making ends meet, but if you are not spending mindfully, you’re losing out on important opportunities. I’m talking about the financial opportunities that can serve you well when you are older.
When you develop good money habits, you allow yourself to have a long-term plan. This long-term plan creates a safety net for you and possibly your loved ones.
How you spend and how you save is ultimately going to determine whether you’ll achieve your goals. Creating the habits that I’m going to mention below is essentially going to give you back control of your life.
These habits will teach you to be well-balanced with your finances instead of being impulsive.
Financial Habits that will Change Your Life
Financial Habit #1: Review and Update Your Financial Plan Regularly
One of the best financial decisions you will ever make in your life is to start having a plan for your money. Simply creating a money plan is not going to be enough, though. You would need to make sure you are regularly reviewing and fine-tuning it to make it better.
Your financial plan is there to help you not only plan but also improve your present and future finances. It will paint a picture of your current financial situation along with your long-term goals.
You can create a personalized financial plan for yourself in my book Financial Planner for Her. To make the most of it, I recommend you review your plan at least once a month. Update any important changes or information every three to six months.
More importantly, you should be changing or updating your plan whenever a significant life change happens. This could be anything from getting a new job to getting a new home or having a baby, etc.
Financial Habit #2: Set Up a Monthly Budget
Setting up a monthly budget is another point that lends importance to planning out your finances. Plan out your monthly expenses. Know what you owe and when.
Budgeting is critical to your success as a financially savvy person. Take special care of any recurring expenses such as credit card debt, housing, unnecessary subscriptions, cell phone bills, and so on. Design your budget roadmap around expenses that are required no matter what.
Laying out your necessary expenses first thing is going to help you build a complete budget.
Budget tip: Financial Planning For Her by Giovana Vega
Financial habit #3: Make Savings a Necessary Part of Your Budget
Savings are crucial. Even if you have only $5 to save every month at first, it counts. Over time, this $5 will be worth a lot more.
One of your first financial goals should be to build up your savings for at least 6-8 months. These savings should account for everything that could constitute an emergency. The goal here is that anything that goes into your savings account is not going to be touched by you unless needed.
I’m all about making sure that you have the means to bounce back no matter what life throws at you. For this reason, I pay a lot of attention to savings and encourage you to do the same.
Financial habit #4: Surround Yourself with the Right Company
To create the right habits, you need to create the right company.
If you want emotional support in your life, you usually rely on your friends and family because they know you best. So, in a way, they are your emotional experts.
Similarly, if you want financial betterment, you need to rely on experts too. Financial experts and advisors are your “good company” when it comes to money.
The benefit of surrounding yourself or listening to the experts online are many. They give you advice that is transparent and competent. They don’t give you personal feedback. Rather, they focus on giving you the facts and the truth of the situation.
Financial Habit #5: Set Life Goals that are Meaningful
Everyone has a general desire for financial freedom. But that’s not a specific enough goal. In truth, that goal is too general.
I want you to be specific about what exactly you want and then work towards it. By specific, I mean concretely defining the amount of money you want to save and by when.
The more specific you are in defining your goals, the higher will be the likelihood of achieving them.
To start, I suggest writing these three objectives:
- What does your lifestyle require?
- How much should you have in your bank account to make that possible?
- What age is your deadline to save that amount?
After defining these objectives, count backward from your deadline age to your present age. You can then establish financial “checkpoints” at different points during the time from your current age to your deadline age.
Write all the little amounts that you want to be saved when you reach these checkpoints. Jot them down on a piece of paper or a financial planner and look at them daily.
Assess where you are every day concerning your goals and amend your financial habits accordingly.
Financial Habit #6: Create Automatic Savings
The rule of “pay yourself first” applies here.
If you have the option, enroll in your employer’s retirement plan. Take full advantage of any matching contribution benefit, which is essentially money for free.
It’s also a great money habit to have an automatic withdrawal amount for your emergency fund. In addition to this, you can also set up an automatic contribution to be made to your brokerage account.
There are many similar options – each depending on the individual’s needs – that allow you to make automatic savings. Make use of those. Your future self will thank you.
Further reading: How to Build Your Emergency Savings Fast
Financial Habit #7: Stay Financially Educated
To be good at something, you have to educate yourself on it.
Just as you are here reading this article on financial habits, you should also keep up to date with other financially relevant news. You are more likely to make better decisions when you stay financially educated. This is because you are more aware of what goes in and around the world of finance and money.
Staying educated could look like keeping an eye on any changes in financial laws. Keeping up with financial news and developments in the stock market. The more you are aware of what goes on in these sectors, the better you will be able to tailor your portfolio according to these changes.
The Path to Your Financial Freedom
What does financial freedom mean to you? Define that. Essentially, define your goals.
Setting life goals is quite possibly one of the most important things that lead to financial success. If you don’t know where you want to go, you probably won’t end up anywhere.
These 7 good financial habits are going to be your holy grail in creating a better life. They won’t make all your problems go away instantly. But they will help you develop healthy habits and will get you on the path to financial freedom. Your goal should be to minimize mistakes as much as you can.
When you do slip up, recognize it, and figure out how you can move forward and make up for it. No matter what you do, it’s always
If you enjoyed this article on Financial Habits that will Change Your Life or have any questions for me, please feel free to leave them in the comment section below!
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