Dealing with personal finances isn’t the most fun way to spend an evening. This chore is boring for many; others may find it daunting or even stressful, especially if you’re in the midst of escaping financial crisis. It’s a task that many of us wish we didn’t need to think or worry about.
However, managing your money is important. The problem is that it may not come naturally to everyone. Keeping your finances in order requires discipline and good money habits.
Best Ways to Become Financially Fit
There are many ways to become financially fit, but these six basic habits are a great place to start.
They Save for a Rainy Day
The biggest habit practiced by the financially fit is prioritizing their savings. Setting aside money for an emergency helps savers better prepare for life’s ups and downs.
Spending less than you earn is important, but that doesn’t have to mean giving up all fun. Smart savers know where to make cuts while still enjoying their lives. This may mean putting a percentage of each paycheck directly into a savings account. They might temporarily give things up, such as dining out or shopping trips, to meet a short-term savings goal. The savviest may even negotiate with the phone, cable or utility companies to get the best rates available.
Whatever your strategy, it’s important to stick to it. Slow and steady progress is better than none at all. A healthy savings account can help provide a cushion in case of an emergency, unemployment or another unexpected event.
They Have Money Goals
It can be difficult to save when you don’t have a specific reason to do so. Without a goal in mind, you may be tempted to spend your money as quickly as you make it.
Setting a concrete money goal helps make saving money feel tangible and can be a great motivator. It also provides an end date, so you know when you’ve reached the finish line. Once you’ve achieved one goal, you can celebrate and start working towards your next dream.
When setting your money goals, try to be as specific as possible. Deciding to save a specific amount—whether it’s for a house deposit, travel or retirement—is better than simply pledging to “save more.” It’s easier to track your progress against a precise number and know when you’ve met your goal.
They Budget and Track their Spending
Financially stable people generally understand the value of creating a realistic household budget—and actually sticking to it. Knowing how much you spend and where can make it easier to achieve money goals.
Whether you write it down or use an app, budgeting should be a part of your financial planning. Start by reviewing your bank statements to get an idea of your monthly spending. There may be areas where you can make temporary or permanent cuts. Once you’ve locked in a final budget, set aside a few minutes each week to record receipts and see where you stand.
It may take some trial and error, but setting and tracking your spending is important to reaching long term goals and avoiding debt.
They Eliminate Debts
Debt can derail a carefully structured financial plan. That’s why financially smart people will most likely eliminate debt as quickly as possible and avoid certain types altogether.
Not all debt is the same. Low-interest loans, such as a mortgage or student loan, can be okay to hold for longer periods of time, as long as you have a plan for paying it off. However, credit cards and other high-interest debts should be paid off as fast as possible. This type of debt accrues interest quickly, making it harder to eliminate the longer it’s held.
People with money smarts are likely to know how much they owe, their interest rates, and how long it should take to completely pay off the debt. They shy away from credit card debt, taking careful steps to avoid overspending and paying the balance in full at the end of each month.
They Don’t Procrastinate
Money trouble can happen fast. Before you know it, you’re in over your head, while the problems keep growing. People who are smart with their finances are proactive to keep issues from happening in the first place. With that being said, making sure you have a good credit rating, for example, doesn’t always come easily, especially if this has been in the red for a while. It is not impossible though to improve this part of your finances.
Procrastination may cause financial headaches. Forgetting to pay the bills can result in late fees that can eat away at a savings account. Neglecting to balance your checkbook regularly could cause overdraft fees from the bank. Forgetting to update your household budget might mean overspending before your next paycheck.
Proactively managing your finances can help small issues from becoming larger ones. Making a weekly, fortnightly or monthly appointment to review your financial standing can help you stay on track and avoid trouble.
They Discuss Money with Their Spouse
For many couples, love and money don’t mix. Discussing finances with a partner or spouse can be awkward, boring or even confronting. Why would anyone want to bring these negative emotions into their relationship?
Talking about money may not be romantic, but it can have some big benefits. One study found that people who talk openly about their finances were more likely to actively manage their money than people who don’t. They also reported being less worried about their financial situation than people who avoid discussing money.
A spouse or significant other may be the natural person to have a money conversation with. People often choose partners who provide emotional support and who can offer sympathy or advice when it’s needed. You can work together to manage the household finances and work towards money goals that benefit your family.
Also Read: Reasons to budget your money
Taking control of your personal finances can be empowering. Practicing a few good habits could help you boost your savings, control debt and live life to the fullest!