We all tend to develop habits that provide a rhythm or structure to our daily lives. Once these habits are developed, they can be hard to break. Building good financial habits can provide a rhythm, or sense of control, for your financial life. Here are eight good financial habits to help you build a sound financial foundation:
- Make sure your financial information and records are organized. Knowing where important financial information is located and having a system for paying your monthly bills will save time and aggravation.
- Use direct deposit for your paycheck. This saves time and gets your money working for you faster.
- Use automated savings plans to save for short term and long term financial goals. This involves having your financial institution or your employer transfer a set amount each month into your savings account to be available for a vacation or a major purchase. It also includes participating in your employer’s retirement plan to save for your retirement.
- Prepare a household spending worksheet. The process of preparing your first one will help you identify potential areas for reducing expenses. Analyzing your spending on a regular basis (perhaps annually) will help you monitor your spending and develop savings habits.
- Prepare a personal balance sheet periodically. Having a current, or relatively current, personal balance sheet 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.
- Reconcile your checking account monthly. This avoids bouncing checks and fees that may be charged if your balance is too low. It is much easier to do this every month than to skip a month or two and then have to deal with multiple statements. You can also sign up for account alerts through Online Banking or download a mobile app to access your account anytime.
- Review all your bills and statements as soon as you receive them. Even if you are not going to pay the bills immediately when you receive them, you can identify and correct any errors by reviewing your bills and statements.
- Make credit card payments promptly and pay more than the minimum. Avoid late payment fees and reduce the amount of interest you may owe on unpaid balances by making sure your payments arrive before the due date. Paying only the minimum will cost you more interest and it will take much longer to pay off the balance.
Your habit of a morning coffee may be a good start to your day. A few good financial habits can be the start of a good financial life.