There’s a rumor going around that money doesn’t buy you happiness.
And it’s true that if you’re looking for love, or want to improve close relationships with friends and family, then money shouldn’t be the main focus here.
But the idea that money doesn’t make you happy is really misleading, especially when you think about the reverse. Because it’s definitely true that not having enough money can be miserable. Recent studies reveal that people who struggle financially are 31% more likely to experience stress on any given day.
If you’re worried about raising your family with mounting bills to pay, then 2022 is a great opportunity to develop good money habits and live more comfortably.
Why having good money habits is important
Have you ever heard anyone downplay the importance of being sensible with money?
Phrases like ‘You only live once,‘ or ‘You can’t take it with you’ are thrown around as excuses for poor money management.
But there are some important reasons to pay more attention to your finances.
Setting a great example for your kids
Teach your kids the value of money and help them understand how to create simple budgets and save up for things. Financial literacy is an important lifelong skill for children to learn.
Be less vulnerable in an emergency situation
Unexpected events happen all the time. Having some money set aside for a rainy day means you’ll always have something to fall back on if you have an urgent medical bill to pay or lose your job suddenly. It’s not nice to think about, but it’s even worse to find yourself in that situation without any money.
Prepare for a comfortable retirement
Retirement always seems so far ahead until you reach it! Don’t be one of the 68% of Americans who are worried they don’t have enough saved.
20 good financial habits to establish this year
1. Create a long-term financial plan
Map out your financial goals and the different stages of life you need to prepare for. These can include medium and long-term goals like:
- Putting money aside for your next family vacation
- Saving money for your kids to go to college
- Thinking about retirement by starting a 401k plan with the help of employer contributions.
- Working out how to pay off your mortgage early
Once you have your goals in place, it’s easier to create an actionable plan of smaller steps to help you reach them.
2. Create and review your budget
A workable budget is at the heart of having good financial habits.
A basic budget takes into account how much money you have coming in, what your outgoing expenses are, and how much you’re able to set aside for savings and luxury items.
But creating a budget and sticking to it is only the first step.
You must also remember to review it regularly and make adjustments if you receive a bonus, have a salary raise or notice that your bills have gone up. Keep tracking your budget to make sure that it’s still relevant to your household.
3. Tracking your expenses
Remember when your parents or grandparents balanced their checkbooks? This may be a thing of the past for most people, but tracking your expenses is an important way to stay on top of your finances and out of debt!
The great news is that there’s a lot less work involved than manually going through your income slips and payments. Instead, you can take advantage of expense tracking systems like:
- Mint
- Pocketguard
- You Need A Budget (YNAB)
- Goodbudget
- Spendless
Download these apps to your smartphone and connect them to your bank accounts. You can even set targets to make sure you’re not wasting your money.
4. Living below your means
Ever heard the phrase ‘champagne taste on a beer budget’?
If this sounds like you and you have expensive tastes without the wallet to back them up, then it’s critical that you start to live below your means. At least until you can afford them!
Living below your means is when you spend less than you earn and find a way to pocket the difference by putting it into savings. Some people find this challenging at first, but it’s a much better alternative than living paycheck to paycheck, or getting in debt.
To help you stay on track, you might follow a budgeting strategy like the Dave Ramsey or the 50/30/20 systems.
5. Paying off debt
Ideally, you’ll be starting off with zero debt – that’s the quickest way to grow your savings. But none of us is perfect, and if you’d like to start practicing good money habits with a pile of debt, then you’ll need to focus on paying that down.
Debt is expensive and if you’re only managing the minimum payment on your loan or credit card bill then this will cost you heaps in the long run.
With the right pay-off strategy, you can knock down your debt and quickly secure a debt-free financial future.
6. Pay yourself first
If you pay your bills, fill up the car, buy groceries for your family and then realize you don’t have anything left to put into your savings, then it’s time to switch things up.
Paying yourself first means prioritizing your savings and retirement contributions so that they don’t get forgotten about. You’ll then know exactly how much money you have left to spend on family expenses.
7. Automate your payments
This can be a game-changer for your finances. If your money seems to do a disappearing act – now you see it, now you don’t – then get those automated bills set up.
Try to time then as close to your payday as possible. You can automate some or all of the following:
- Mortgage or rent
- Utility bills
- Internet
- Subscription services
- Cell phone
- Car loan
- Childcare payments
- Credit card bills (if any)
- Your savings contributions
- Your retirement savings
Payment automation can save you a lot of time and hassle, but it shouldn’t be a set-it-and-forget-it system. Remember to still review your finances to keep an eye on how much you’re spending and whether you can make any budget cuts.
8. Save for retirement
One of the best ways to save retirement is to set up a 401k plan which you and your employer pay into.
This is like getting free money. Increase your deductions as much as possible to the maximum amount your employer is willing to contribute – this is the quickest way to grow your retirement savings pot.
If a 401k isn’t an option for you, then there are other ways to create your nest egg including:
- Individual retirement accounts (IRAs)
- Brokerage accounts to invest in securities, stocks, etc.
- Annuity savings
- Investment opportunities such as real estate, small businesses, or even trading fine art.
9. Build an emergency fund
It’s useful to have at least 3-6 months of income saved up in case you’re hit with an emergency situation.
Life loves to throw the unexpected at us, whether that’s unemployment, home repairs, or a broken-down car.
If you feel overwhelmed by the amount of money you should have stashed away, then break down your goal by saving $1,000 and then take it from there.
10. Plan your purchases
Planning your purchases can help to keep your budget on track. When you need to buy something new, always do your research first to find out everything you need to know about the product.
Visit review sites, search for the best price, check if there are any discount codes available, and use price comparison engines to get a great offer.
eCommerce sites and in-store displays are always laid out to tempt you into taking action today. But a person with good financial habits knows to resist, wait a while, and check out all the options first.
11. Resist emotional spending
Are you an impulse buyer who loves buying the latest, shiny products? Or maybe you’re an emotional spender and tell yourself that you deserve that new handbag whenever you’re having a bad day?
Impulse purchases can quickly throw your budget off track. Even if it’s just $50 a month, that can add up to $600 per year that could have gone into your savings instead.
Remember that the dopamine released from shopping is just a short-term hit and that it has long-term negative financial consequences. So resist the temptation to spend!
12. Seek out FREE family activities
Family activities can quickly eat into your budget. Going to the cinema, eating at a family diner or a trip to the zoo can easily cost $100 depending on the size of your family.
But you and your kids can still have plenty of fun together.
Look within your local community to find FREE family entertainment in the area. Check out Facebook groups, newspapers, and flyers to see what’s on offer in your nearby:
- Parks
- Beaches
- Museums
- Libraries
13. Commit to personal finance education
One of the best ways to establish good money habits is to keep on learning and picking up new tips to secure your financial future.
You can:
- Listen to personal finance podcasts
- Watch financial experts on YouTube
- Read budgeting blog articles
- Take a personal finance course
The next time you pick up your phone when you have some downtime, why not build your education instead of being tempted by online shopping ads?
14. Learn how to reduce your bills
There’s often room for improvement with the bills you’re paying. Try calling the company that is charging you and negotiate a better deal – often they’re interested in keeping you as a customer rather than losing you to a competitor.
To strengthen your case before you negotiate, do some research and find other companies that are offering better interest rates or deals. This can result in a price-match situation.
A little money slashed off each of your monthly bills can soon add up into greater savings.
15. Develop frugal eating habits
The US throws out more food each year than any other country in the world – roughly 219 pounds of waste per person.
This is terrible for the environment and your wallet. Save money by:
- Only buying what you need
- Taking the time to meal prep each week before a grocery shopping trip
- Avoiding takeouts and going out to eat unless it’s a special occasion
- Getting into the habit of making packed lunches so you spend when you’re out and about
- Learning how to batch cook and freeze leftovers to reduce food waste
16. Use coupons
Couponing can give you a little extra wiggle room in your budget and you don’t need to be an extreme couponer for this to be effective.
Use couponing apps like Rakuten or Ibotta as a cashback alternative.
17. Have a plan for your spare change
What do you do with the change you bring home in your wallet or pocket?
Have a plan for your cash and put it in a money jar. You’ll be amazed how quickly it mounts up and if you empty it twice a year, you’ll have saved for something worthwhile.
You can either save it in one large container and then cash it back into your bank account when you’re ready.
Or if you’re super organized, you can design a series of money pots and save for different goals like:
- Vacation
- Date night
- Car repairs
18. Save your bonus
Whether you receive a regular bonus or are surprised with a one-off payment, the temptation is always to splurge the extra money.
But if you want to take a closer step towards financial security, then a better plan would be to invest it into your savings account where it will earn interest and grow.
19. Increase your income
If your bills are going up but your income has plateaued then have a think about how to earn more.
There are three main ways to increase your income:
Ask your boss for a raise – If you haven’t had an increase for a while and you can prove that you consistently deliver excellent performance, then your boss might be open to negotiating a raise. After all, the cost of recruiting someone to take your place might be more expensive than paying you more.
Look for better-paying jobs – Take a look at the industry you’re in. Is there more money to be made elsewhere? You might want to take the plunge.
Start a side gig – Instead of changing up your regular job, you can take on a side gig and work whenever you’re available. This might be a passion project like teaching yoga or selling handmade crafts online. Alternatively, you could offer your services as a freelance proofreader, web developer, bookkeeper, etc.
20. Keep on top of bank fraud
Unfortunately, financial scams do occur and sometimes you have to help your bank in catching them. By regularly reviewing your statements, you can identify any unusual transactions that you don’t recognize and alert your bank asap.
If you believe that you have been the victim of fraud, then your bank will advise you of the next steps and what processes are in place to get your money back. But this can only happen if you notice it’s occurred in the first place!
Bad money habits to avoid
Even if you commit to all the above good money habits, you shouldn’t undo your hard work with the below bad money habits.
1. Spending on credit cards
Do you have a credit card just for emergencies? The problem is that it’s easy to give in to temptation when you’re having a bad day.
If you’re carefully saving money each month, take care not to neutralize the progress by racking up debt that you’ll owe interest on too.
2. Ignoring your debt
Do you have a head-in-the-sand approach to your debt? If you know you have an unpaid loan or credit card to sort out, it’s vital that you sit down and work out exactly how much you owe.
Then you can consolidate the debt, pay interest on a single account and work out how to pay it down quickly.
Without understanding the value of your debt, the interest will continue to accrue and can quickly become unmanageable.
Knowledge is your friend, even when it comes to debt so always know your numbers.
3. Shopping for status
Trying to keep up with the latest trends on Insta? Whether you want to buy the latest car, blender, designer clothes, or handbag, it’s dangerous to pursue a life you can’t afford right now.
There’s nothing glamorous about racking up debt and then being skint as you pay it off.
4. Passing on negative money habits to your kids
It’s so important to teach good financial habits to your kids to set them up for success in the future.
Remember that kids are like sponges and will follow your example. So if you teach them not to pay a bill on time or that it’s ok to splash your cash without worrying about the consequences, then don’t be surprised when they struggle to manage their own money years down the line.
Final thoughts on developing good money habits
Following good money habits doesn’t have to be daunting. It’s about arming yourself with facts about your own personal finances and putting workable solutions in place to help you keep track of your family expenses and goals.
When’s the right time to get started? How about today?
She is also passionate about parenting, mental health, and women’s issues, including how these areas fit into working life. She covers these topics for publications like Business Insider and Entrepreneur.