Good Money Habits to Create, Bad Money Habits to Stop

Did you know that 56% of Americans live paycheck to paycheck? It’s an upsetting statistic. But just because that may be your situation right now doesn’t mean it has to stay that way forever. Through the power of small, everyday habits, discipline and consistency over time, you can develop better money habits, get rid of bad financial habits and create a financially healthy life.

While it’s important to focus on creating good money habits, don’t forget you’ll need to also get rid of the bad.

What are some good financial habits?

Creating good money habits can help become a sustainable way to build wealth over time. Let’s take a look at the top 10 good financial habits that can boost your financial health in the long term.

1. Following a budget
   Creating and sticking to a budget is at the center of developing good financial habits. You need to know how much you make and your monthly expenses before you can allocate how you want to spend and save the rest of your money. Learn how to create a budget for the first time, then use our free budget calculator to input your figures.

2. Automating your finances
   Automating your finances is one of the best things you can do to set yourself up for financial success. Set all of your bills up for autopay  you can schedule the date of the month for money to be withdrawn from your account based on when you get paid. This way, you’ll never be late paying your bills. Aside from just automating your bills, it’s equally as important to automate deposits to your savings and investment accounts.

3. Starting an emergency fund
   Life doesn’t always go as planned, so having an emergency fund is an essential part of creating better money habits. When an emergency strikes and you don’t have savings, it can create a ripple effect that could impact your financial success for years to come.

4. Contributing to a retirement account
   In addition to saving for an emergency, saving for retirement is equally as important. Not only will saving for retirement set you up for future financial success, it will also help mitigate your current tax payments.

5. Investing
   Investing is a key pillar in achieving financial independence. While many people think you need to already be wealthy to start investing, technology has made investing more accessible than ever before. Learn how to invest like the pros using your spare change to grow your money for the long term.

6. Shopping smart
   In order to create better spending habits, start looking for deals. When you know you need something, especially a larger purchase, shop around for the best possible deal. For everyday purchases, there are plenty of apps like Rakuten, Ibotta and Honey to help save you money.

7. Using credit cards to your advantage
   Credit cards tend to get a bad reputation. While you definitely don’t want to be in credit card debt, if you pay off your card every month, a credit card can be a powerful tool. Credit cards can help you not only build credit, but also receive rewards. Many credit cards will offer perks like cash back on dining or groceries  it’s free money on purchases you’re already making anyway.

8. Tracking your expenses
   After you’ve created your budget, you’ll want to make sure that you’re sticking to it by constantly tracking and monitoring each and every purchase. While that may sound like a daunting task, there’s lots of easy-to-use tools like Mint that can help monitor your spending for free.

9. Being conscious of spending
   You may not realize how much you may be spending on daily lattes or subscription services. And bills like cable can easily be negotiated or done without. Try using Trim, which will analyze your expenses to see where you can save. Being conscious of spending will help create a more sustainable financial future.

10. Paying yourself first
    How do you develop good saving habits? By paying yourself first! Aside from saving for an emergency fund, you’ll want to have an additional savings account that receives automatic deposits. Most employers allow you to make automatic deposits to multiple accounts, such as your checking and savings accounts. This will allow you to save money immediately, before paying any bills. Find out what kind of saver you are in order to optimize your savings strategy.

What are some bad money habits?

Here are a few common bad money habits to get rid of to set yourself up for success:

1. Overspending
   It’s easy to overspend if you’re not carefully tracking your finances. Sometimes, we shop online when we don’t need to, pay for subscription services we don’t use, or unknowingly pay for hefty delivery fees. Spending adds up, and when you consistently spend more than you earn, it becomes a bad money habit that could negatively impact your finances.

2. Paying the minimum on your credit card
   Having any credit card debt is less than ideal. But when you pay only the minimum month after month, you’re wasting money on interest, which will only leave you more in debt.

3. Paying bills late or missing a payment
   Not paying your bills on time is a bad money habit to change immediately. Depending on the type of bill, you could be charged a late fee or receive a higher interest rate. It could even cause your credit score to go down if left unpaid for more than 30 days .

Overspending, only making minimum payments while maxing out your credit cards, and paying bills late can lead to financial trouble over time. If you already have a lot of debt, you may want to consider a debt consolidation loan to help make payments more manageable. Be sure to brush up on loan terminology so you can make an informed decision for your financial situation.

Developing healthy financial habits

Developing healthy financial habits can be achieved through getting rid of bad money habits and working to create good money habits over time.