Whether you want to pay down debt, save for retirement, or raise your credit, forming good habits is crucial to achieving your goals. Just like exercising and eating healthy are important for maintaining physical health, there are certain habits that help maintain financial health as well.
People who are financially fit tend to have the same habits. If you want to improve your financial health, consider adopting some of these common habits from people who are in control of their finances. Some of the top habits of the financially fit include:
This elementary advice often goes unheeded, which is a large part of the reason the total amount of credit card debt in the United States is a mind-boggling $793.1 billion. The “buy now, pay later” mentality ends up trapping many people and costing them far more in interest payments than if they had simply waited to buy things when they could afford it. If there is something you really want, whether it’s a new pair of shoes or a vacation, save your money and pay cash for it.
Budgeting is one of the most basic—and often overlooked—aspects of smart money management. Sticking to a budget takes a little practice and getting used to, but it’s an important part of helping you track your expenses and see where you may need to change your spending habits. Make and keep a realistic budget that covers your expenses, includes saving, and helps you pay down your debt.
If you lost your job today, would you have enough money to pay your bills for the month? An important part of financial fitness is keeping a savings account to draw on in an emergency. Having money set aside helps keep you from piling up debt if you need to cover an unexpected cost, like car or home repairs.
Keeping your debt at a manageable level is important for a number of reasons. First of all, your credit score is affected by the amount of debt you have. According to myfico.com, your credit utilization, or how much of your available credit you use, makes up a third of your overall credit score. If you want to be financially fit, make sure you keep your balances below 30% of their overall limit.
If you carry a balance on your credit card, making more than the minimum payment is important if you ever want your balance to go down. Minimum payments are designed to keep you in debt—and paying hefty amounts of interest—as long as possible. People who are financially fit tend to pay their balances off each month, and when they can’t, they don’t fall prey to minimum payments.
People who are savvy with their finances let their money work for them. If you’re not investing your money anywhere, the good news is you don’t have to be a stock market guru or financial wiz to get started. You can start simple by investing in your own 401k, especially if your employer matches your contributions. This will provide you with some of the highest returns on your money. You can also start by investing in a balanced index fund of stocks and bonds, which will provide opportunities for long-term growth.
Being financially fit starts with good habits. By implementing good financial habits, you can stay in control of your finances no matter what comes your way.