Five Better Money Habits To Adopt Before the New Year
Better money habits is something most people can benefit from. Many people begin the New Year by setting one or more resolutions like sticking to a budget or paying off debt. But why should you wait until the New Year to start implementing better money habits? Research shows that it takes about 66 days or two months to form a new habit. You can give yourself a positive head start on the New Year by practicing your habit beginning today.
Below are five better money habits to adopt as we enter the new year
Commit to saving money
Does saving money feel overwhelming to you? Most people avoid saving because they look at the big picture rather than focusing on what they can do regularly to achieve the intimidating goal ahead of them. To start, try saving just 1% of your income. Then, once you feel comfortable doing that, increase your savings goals to 10-15% of your income. Before you know it, you’ll be an expert at saving money.
In an effort to not falter on this very important task, automate your savings. Pretty much every bank allows you to set up automatic transfers from your checking account to a savings account. By doing this, you never miss paying yourself first.
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Investing your money is not just for people that have a lot of money. Everyone should be investing in some fashion. When you invest in your future, you provide yourself with the power of feeling financially secure. One of the first places you should be investing is in your employer’s 401k, especially if they will match your contribution. Hello free money! You should then get with a financial advisor (assuming you don’t know a whole lot about investing) and see where it makes sense to put your money so you reach the financial goals you have set for yourself.
If you don’t know by now about the power of compound interest, look into it. In a nutshell, the money you invest continues to earn interest on top of interest as you keep putting money in. Over time, you can build up enough money to provide yourself with a nice retirement income that will make your life much more comfortable.
As we mentioned above, you don’t need to invest thousands a month. Even a contribution of $50 a month can make large gains over time. If you still feel “investing” is too risky, we believe the larger risk is not being in charge of your future financial situation. Check out this investment calculator to see what your estimated retirement savings can be.
Plan ahead for big expenses
You likely know when you spend the most money every year. For example, you may increase your spending for birthdays, holidays, vacations, weddings, graduations, and more. Once you take stock of when you’ll be spending the most money, you can make a calendar of all those events and then start putting money aside for those occasions. That way, you’ll feel much more prepared, and you might even spend less money than usual because you’ll be more aware of how spending during these times will affect your budget.
Get honest with yourself about your expenses
You may think that you can’t live without many of your expenses, like regular dinners at your favorite restaurant or trips to the movie theater. But you can probably scale back on some of those expenses without sacrificing fun. Consider a trip to a restaurant a once-a-month treat and then spend time learning how to make some of your favorite dishes at home. Instead of going to the movies, incorporate some of your favorite things about the movies into your home: make popcorn, get some comfy pillows, or save up for a projector.
Find an accountability partner
Making changes to your financial habits is not easy. One way to help keep yourself on track is to find yourself an accountability partner. This person could be a friend, coworker or a family member. Anyone you can put your faith in that they want to see you succeed and that you can count on them to help you get back on track when you veer off (for most people this is bound to happen). Having an accountability partner provides you with leverage on your goals. With this set up, you tend to work harder to stick to your goals when you know someone is watching.
Now that you have some helpful ideas, you should feel inspired to start implementing good money habits now, ahead of the New Year.