6 healthy financial habits worth developing
For the most part, habits get something of a rough deal; treated as if the idea of developing a repetitive pattern of behaviour is inherently harmful. However, this isn’t the case: habits, when used correctly, can actually be reassuring and inherently beneficial. Getting into the habit of going to the gym, for example, is a good habit, as is always getting a good night’s sleep.
In a similar vein, there are a number of good financial habits that can be developed - much to the benefit of your finances as a whole, with the following perhaps the most useful of all…
1. Treat saving money as exciting
Saving money is one of the most important aspects of financial management, but it does have a significant downside: saving doesn’t feel particularly exciting. If you decide to spend rather than save, then you immediately benefit from a kind of reward; an experience to enjoy, a treat to indulge yourself, and so on. Simply sliding funds into a savings account doesn’t quite have the same thrall - which can make convincing yourself to save rather unattractive in comparison to spending.
It is, however, possible to change the way that you see savings; as the likes of Cash Flex explain, you could actually start to see savings almost as a hobby, something that you actively enjoy doing. You can build the habit of seeing another amount saved as a “win”; a greater contribution to your financial safety and security in the future, rather than a drain on your existing way of living.
2. Reserve funds for special occasions in advance
We have all faced a scenario where we set a budget for the month, carefully taking into account all of our bills and outgoings, and then realise that there’s a host of birthday and anniversary gifts to buy in the next four weeks. Suddenly, a budget that was looking manageable is beginning to look squeezed, and it’s only two days since payday.
The above scenario can be avoided by routinely setting funds aside for special occasions and events - even if there are not any such occasions immediately on the horizon. Try to get into the habit of saving a small amount each month, which you can then dip into when birthdays, anniversaries, and weddings crop up throughout the year.
3. Never accept the first price you see
The most financially savvy people tend to see the first price for anything as an opening point for further research. For example, if they want to buy a camping tent, then they will find the tent they want, check the price, and then set about beating it - they’ll use cashback sites, look for high-quality secondhand versions, or even try haggling if possible in order to bring the price down.
Getting into the habit of doing the same can be wondrous for your finances, especially if you extend the idea beyond buying items and apply it to every price you are asked to pay. Your car insurance; the amount you spend on your TV package; the price of a haircut - they are all nothing but reference amounts, that you can then try to beat by switching to an alternative supplier or finding a discount code. Obviously, not every price can be reduced with research, but it’s definitely worth getting into the habit of at least seeking a lower amount before you commit to buy.
4. Track every amount you spend
One of the best ways of managing your expenditure is to get into the habit of tracking everything you spend - including even small purchases that would usually be forgotten. By keeping a diary of how you much you have spent, you’re more likely to be able to identify patterns of spending, which can help you make cutbacks if you ever need to in future.
You can record your expenditure however you wish, but most people find purchase-tracking apps such as Yolt or Tandem to be the most useful. The major benefit of these apps is that they allow you to quickly add a transaction on the go, which is far more convenient than having to try and recall purchases or go through receipts when you get home each evening.
5. Forgive overspending
A simple habit, but one that can make financial management far less stressful. If you set a budget, and circumstances arise that mean you have to break that budget, then get into the habit of letting it be. Sure, it’s not ideal, but there’s no way to account for literally every circumstance when you set yourself an amount to spend - problems crop up and opportunities present themselves, so a little bit of flexibility is to be expected.
If you do find that the fact a recent history of overspending plays on your mind regardless, then try to channel that energy into something productive. Look through your purchase tracking history and try to remember why money was overspent, and what you could do differently in the future. However, try not to let this reflection turn into punishment - i.e. setting yourself an unnecessarily harsh budget next week to compensate for the overspend; reduce your budget a little, but financial management should never feel like a burden, so don’t go too far.
6. Always pay more than the minimum amount
Credit card interest can cause your overall amount owing to skyrocket in an incredibly short space of time. Unfortunately, just paying your minimum payment will not prevent this scenario; in fact, paying the minimum payment only may mean that you’re not paying off the balance at all, just the interest.
It’s therefore helpful to get into the habit of seeing your minimum payment as almost irrelevant; an amount you need to cross to keep up-to-date, but just a starting point for further payments. Even if you can only pay a tiny bit more to your credit card each month, then do so - every contribution helps to make the interest that bit more manageable, so it’s well worth doing.
If you can develop the habits above, you should be able to look forward to a healthier financial future.
This is (obviously) a contributed post.