Taking steps to forming good financial habits is no easy task, but it can be done. If you’ve decided to build better finances, try following these three steps:
1. Evaluate your spending habits: Try keeping a list of your expenses for an entire month. Carry a little book with you and track every purchase you make — whether it’s $1.25 at the vending machine, or $500.00 for car repairs. This way you can see where you’ve been spending your money, and if there are any specific areas where you spend too heavily. By understanding your spending habits, you can begin to control them, and decide if there are areas where you can cut back. Take a look at your bills, for example. If you’re spending $120 a month on cable, and are forced to use your credit card to buy groceries, it might be a good idea to spend less on entertainment, and focus on the essentials.
2. Eliminate your debt: One of the tenants of forming good finances is lowering your debt. Figure our which cards are charging the highest interest, and pay those off first. If you’re paying for a car, or a house, set up deductions for those expenses automatically, so you’ll be able to make your payments on time. Focus on re-organizing your finances so that you can take care of these debts as soon as possible.
3. Set up a savings plan: One of the most important steps to forming good financial habits is learning to pay yourself. A savings account is an essential part of financial preparedness. If something should happen like job loss, or an emergency, having money in savings can help soften the blow of unexpected expenses. If you car breaks down, for example, you might need to rent a car to get to work. Having savings will allow you to afford these expenses, even if you don’t get your next paycheck for a while. Having plenty of savings tucked away can help you feel secure, and prepared for life’s disasters.
If you follow these steps to forming good financial habits, it could help you figure out your spending patterns, get rid of your debt, and build up your savings. If you’re having trouble following these guidelines, try meeting with a financial advisor. They can help you come up with a plan to meet specific goals. Forming good financial habits now is key to your future monetary security, and the sooner you start, the better!