Do you usually struggle with managing your finances, and want to learn how to develop good money habits? You have come to the right place! And you are also not the only one who has this problem.
Money can be a tricky thing. Many people don’t even know where theirs goes, only that one moment they have it and the next it is gone. But this doesn’t have to be your situation.
You can learn how to develop good money habits that will enable you to be better at making, spending, and saving money. This post will provide several tips to help you improve your financial management skills.
But first, what are some examples of good money habits? And what are the benefits of good money habits? Read on…
Examples of Good Money Habits to Develop
- Create a monthly budget and stick to it.
- Save a percentage of your monthly income for important things like building or buying a house, emergencies, or retirement.
- Live within your means.
- Spend your money wisely by cooking food at home, buying only what you need, choosing quality over quantity, etc.
- Invest your money in things with good returns, such as real estate, stocks, or businesses.
- If self-employed, separate personal and business finances and start paying yourself first.
- Pay your bills on time or ahead of time.
- To stay out of debt, avoid borrowing money.
- Keep getting educated about finances, e.g., by watching videos and reading books, motivational quotes, articles, and blogs on personal finance.
- Bulk buy things to reduce the number of shopping trips, hence the chances of impulse buying.
- Diversify your income streams.
- Pay off debt.
How to Develop Good Money Habits
- Become more self-aware
If you usually find it hard to manage your finances, your first step as you learn how to develop good money habits is to increase your self-awareness.
Conduct some self-reflection, and try to identify when and what you spend your money on. Determine what makes you want to spend money and whether some particular circumstances or people trigger your bad money habits.
Identifying your triggers for bad spending will make it easier to catch yourself when you are doing it and stop.
Being more self-aware will help you develop the other good money habits on this list.
- Improve your financial education
Having money but little to no financial education is not a good combination. You may end up overspending, making bad investments, being conned, or choosing the wrong savings accounts.
No matter how much income you earn, it is vital to improve your financial education if you want to learn how to develop good money habits. You can do so by reading personal finance books and blogs, listening to podcasts, taking classes, and signing up for courses, among other ways.
Improving your financial education will help you be better at making money, budgeting, saving, spending, and investing. You will also gain more understanding of credit scores and risks.
- Set financial goals
Now that you are educated about finances, the next step to take as you learn how to develop good money habits is to set your financial goals.
These goals will give you a target, something to focus on, and motivate you to keep practicing the good money habits you are trying to build.
Since we are all different, our financial goals will differ depending on what we want to achieve. Examples of financial goals one may set include; becoming rich, improving their credit score, saving for retirement, paying off debt, buying a house, etc.
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- Start small
Setting goals is one thing; staying committed and achieving them is another.
Many people often set big financial goals, but then, along the way, they get discouraged while working on them if they fail to see results as fast as they hoped.
When learning how to develop good money habits, it is important to set goals and commit to them. If they seem too big or hard to achieve, you can break them down into smaller, more achievable goals.
Breaking down your big goals into smaller ones will help you stay motivated as you see progress and celebrate your small wins along the way.
On the topic of starting small, this also applies to breaking your old bad money habits.
Don’t expect to break them overnight. It will take discipline and time. So, trust the process, be patient with yourself, and break or build good money habits one at a time.
- Make use of finance apps and spreadsheets
There are many financial applications for various purposes available, and most are free to download and use. You can find money apps that enable you to create and stick to a budget, transfer or make payments easily, track your spending, and save money.
If you want to learn how to develop better money habits, you should start by downloading some apps to help you manage your finances. Some good money apps to consider using include Mint, Prism, PocketGuard, Spendee, and EveryDollar.
Aside from the finance apps, creating an Excel spreadsheet or Google sheet for your expenses can also come in handy when you want to develop good money habits. Create one to assist you in accounting for every cent you make, spend, or save.
- Give yourself time
How long does it take you to see something you like and buy it? Many people usually have the bad money habit of impulse buying, even when it comes to large purchases. They never take time to really think about the item they want to buy before paying for it.
If you are one of these people, you need to learn how to develop good money habits that will help you stop impulse buying. Start giving yourself time before buying something, and always create a spending plan to guide you when shopping.
When you see something you desire, especially if it is expensive, curb your impulses and decide not to buy it immediately. Sleep on it and really think about whether you need to make that purchase.
You will realize that most of the things we usually think we need right now, we may not desire them as much after giving ourselves time to think about them.
- Prioritize needs over wants
It is not enough to just set financial goals. One of the best things to do as you learn how to develop good money habits is to start prioritizing your needs over wants.
For example, you may want to travel to some luxurious destination, but at the same time, you have bills to pay, you need to do grocery shopping, or school fees that need to be paid, among other basic needs. Which should you spend your money on first?
Unfortunately, many people make the mistake of spending first on things they desire but don’t really need. If you usually do this, it is time for you to break this bad money habit.
However, prioritizing needs doesn’t mean you should never spend on your wants. Just that you should allocate money to wants only after catering to your needs.
- Try some money challenges
Self-discipline is important for anyone looking for ways to develop good money habits. You can become more disciplined but also make financial management fun by challenging yourself.
No-spend months, cook and eat at home challenge, 52-week saving challenge, weather Wednesday, dry January, swear jar challenge, no coffee challenge, and the 100 envelop challenge are great money-saving challenges you can participate in to increase your savings and develop other good money habits.
Many of the money-saving challenges not only help you spend your finances wisely but also break other bad habits you may have. For example, you will stop eating out or eating junk, minimize swearing, and stop overindulging in alcohol, among others.
- Be selective with the company you keep
According to studies, the people you spend the most time with usually influence your behavior and habits. For instance, if you spend a lot of time with people who overspend or those who pressure you into spending money on things you don’t need, you may start to have bad money habits as well.
Since you are here to learn how to develop good money habits, one of the best things you must do is surround yourself with positive influences.
For example, try to be close to people who are ambitious, who spend their money well, who advise you on the best ways to make or spend money, and who don’t take advantage of you.
If you want to develop better money habits, you must cut off toxic people from your life. These are the people who have a poor money mindset, those who borrow your money but never repay, those who pressure you to spend money, and those who encourage you to make bad investments.
- Play money games
Like money-saving challenges, financial games can help you develop good money habits. You can play these money games for free online on various websites, or you can download applications.
Money games not only help with improving your financial education, but also make budgeting, saving money, and tracking expenses fun.
We have discussed some good money games in these posts;
- 17 Ways to Get Your Life Together (and Why You Need to)
- 7 Easy Ways to Encourage Kids to Love Learning
- 10 Best Ways to Distract Yourself from Problems for a Little While
7 Benefits of Good Money Habits
- They make you conscious and cautious about your spending
- You experience reduced financial anxiety and stress
- They enable you to make the most of your money
- Good money habits provide a safety net in case of emergencies
- They enable you to plan your future
- You develop self-discipline and self-control
- Good money habits make it easier for you to achieve your financial goals
Making and managing money are common struggles for many people worldwide. But no matter how much money you have, you must find ways to develop good money habits.
Keep in mind that if you are a poor person with bad money habits, you may never escape poverty. And if you are rich with poor money habits, you may end up in poverty in no time.
Knowing how to make, spend, and save money is an essential life skill. Hopefully, the above financial tips have helped you discover how to develop good money habits and the benefits of doing so.
Understanding how money works and making good financial decisions are among the best ways to invest in yourself. Your future self will thank you for finding ways to develop good money habits that benefit you even later in life.
Read more articles from Aisles of Life here.