Top 10 Financial Habits to Cultivate
It's important that you develop healthy financial habits that will lay the foundation for a solid financial future. Here are 10 financial habits that you must cultivate.
1. Save at Least Part of Your Income
It does not matter how much money you earn; the best financial habit to cultivate is saving your money. When you get your paycheck, pay yourself first and consider this payment a monthly expense. Take a minimum of 5-10 percent of your income and put it into a savings account.
2. Make a Budget and Stick With It
Make a list of all your monthly expenses and income. Do you have enough income to cover your expenses? If not, then cut back on your expenses or earn more money with a second or third job. Know what is coming in as income and the amounts going out as debts. The goal is to make enough to cover all your debts and still save for the future. Go to the Living a Better Life website for free downloadable budget planner.
3. Balance Your Checkbook
Keeping track of your expenses and income is simple if you balance your checkbook on a regular basis. Do it at least on a monthly basis so you can keep on top of money is coming in and what is going out. Many banks have online features so you can track spending on a daily basis. To find the highest interest rates for checking accounts, visit www.checkingfinder.com.
4. Have an Emergency Fund
If all of your expenses are being paid on time, start saving for an emergency fund. This fund is available for emergencies that arise: car repairs, a leaking hot water tank, or any other unexpected expense. Hopefully, you will not have too many emergencies and you can build up this fund to equal three to six months of your income. If you lose your job, you can use the fund to pay your bills until you find new employment.
5. Stay Debt-Free
It is hard to think people can live without credit cards and loans -- however, it is possible. Instead of using credit cards to make purchases, use a debit card affiliated with your checking account. This way you only spend what you have.
If you're paying off a mortgage, you can pay down your mortgage quicker by making extra payments each month that go toward your principal, only. The payments do not have to be large payments, but any extra amount will help you pay off your loan sooner.
6. Sacrifice Instead of Splurging
The only way to save and be debt-free is to sacrifice instead of splurge. This means not going on lavish vacations, buying everything you want, or going out for lunch everyday. It means cutting back on the extras and saving for a goal. The goal might be a new appliance, a new TV, a vacation home, or a new deck for your home. No matter what the desire, saving for it versus charging it is one of the best habits you can cultivate.
7. Pay Bills on Time
Paying your bills on time is both smart and responsible, and your credit score will reflect this positive behavior. If at some point you want to buy a house or refinance your present home, lenders will use your credit score as a barometer to measure the risk you pose. If they see that you pay your bills on time, you are more likely to be approved for the loan. Receive a free credit report at www.annualcreditreport.com.
8. Look for Real Estate Investments
Do you already own your home? If you don't, owning may make more financial sense than renting, so start saving for a down payment. Do not just think about buying a single family home. Consider buying a multi-unit property for your first home or as an investment property.
9. Look for the Best Investment Products
Always look for the best interest rates when depositing your money in a savings bank or any other investment product. Get-rich-quick schemes are rarely as good as they sound. Slow and steady investing with less risk over the long term can produce successful investing.
10. Teach Your Kids Good Financial Habits
Now that you know which good financial habits to cultivate, begin teaching your children the same habits. If you give them an allowance, make sure they are earning it. Teach them to save for that toy, bicycle, or new pair of sneakers. Obviously, your children will not be supporting themselves, but having them learn at an early age to work for their allowance and save are lessons they will appreciate later on.
Have them open savings accounts as soon as they are able. Some schools have a savings plan program with a local bank. Visit the Family Education Web site for tips on how to help your children save: www./life.familyeducation.com/money-and-kids.
