How to develop healthy financial habits
Having healthy financial habits is absolutely necessary in order to achieve many of your life goals such as buying your first home, paying for your education, or even purchasing a car. Knowing that you’ll have the money you need, when you need it, will help you reach your objectives faster and without hassle.
For many, it could take years to develop good financial habits. But the reality is, the sooner you figure it out the better your chances are of successfully meeting your goals. To get you started on the right path, we’ve put together the following tips and tricks that will help you develop the right financial habits today.
Tip #1: Use your credit card wisely.
Having a credit card is useful, especially when trying to build good credit history. However, when you spend more than you can pay back at the end of the month then it becomes a burden on your financial wellbeing. Therefore, you need to understand your own finances and prevent yourself from making expensive purchases on your credit card that will take you more than 3 months to pay back.
Similarly, you should aim to make your credit card payments on-time each month. Every time you miss your credit card payment, the creditor adds a late fee which in-turn increases your interest rate. Additionally, late credit card payments also damage your credit score but this can easily be reversed by getting in the habit of paying your bills on time.
Tip #2: Automate your savings.
Arrange for a portion of your pay or income to be saved automatically in a savings account or a TFSA. Doing this will make it more difficult for you to access this money and in-turn will help you increase your savings faster. Many experts suggest putting at least 10% of your income into savings—and some recommend as much as 25%. If that sounds too hard, start low and build your way up as your income increases.
Tip #3: Track your expenses.
Where are you over-extending? Not sure? Use an app or an excel sheet to monitor what you’re spending on every month. This will give you an idea of what your “needs” versus your “wants” are. Once you understand where your money is going, you can then figure out where you need to allocate it to make the best use of it.
Tip #4: Create a monthly budget.
The best way to make sure you’re not spending beyond your limits is by setting up a monthly budget. Once you’ve determined what you’re spending on every month, you can prepare a suitable budget that will cover your expenses while also ensuring that you will have enough money to put towards your savings.
Tip #5: Set goals.
It’s important to figure out what you’re saving for. This can be a short-term goal such as saving towards a trip to Japan, or a long-term goal such as saving for your retirement. Having objectives laid-out in front of you will give you the motivation that you need to work towards achieving them.
Healthy financial habits are for everyone and the sooner you start developing them, the better it is for your future. Start making use of our 5 essential tips today for a stress-free and successful tomorrow.