“Simple daily disciplines – little productive actions, repeated consistently over time – add up to the difference between failure and success.”
– Jeff Olson, The Slight Edge
On my self-improvement journey, I’ve learned one really important thing – the power of habits. Whether it relates to health, relationships, or finances, the power of habits is unprecedented. This is great news for you! Instead of attempting something grand, you can instead focus on small, daily actions that will have dramatic results over time.
You don’t just want to have any old habit, however. You need to make sure that your habits are positive, and that they move you toward success. You don’t want to be in the habit of doing something if it’s not taking you toward a vision or goal. But once you decide which habits to adopt, you can implement them, and little by little, you’ll change your life over time.
In terms of finance, there are numerous ways to go about building a strong financial foundation. Here, I’m talking about the best habits I think you can be in to set yourself up for financial success.
6 Money Habits to Set You Up for Success
1. Pay yourself first
Set up your finances so that as soon as you’re paid, money is automatically moved into a savings account. One option is to have an amount from your paycheck directly deposited into a separate bank account. Another option is to set up an automatic transfer on payday from your checking account to a savings account.
Here’s why paying yourself first is important: If you pay yourself first, you’ll still be broke by your next paycheck, but this way you’ll have savings. What do I mean by this? That you tend to spend what you let yourself spend. If you are in the habit of paying yourself every pay period, you’ll treat it as an expense and build wealth little by little over time.
2. Avoid debt
If you have debt, create a plan to get out of it. Once you have your get-out-of-debt plan, implement it in the form of a habit. Don’t wait until the end of the year for a bonus. Instead, start chipping away at your debt regularly (daily, weekly, or every pay period). If you constantly are chipping away at your debt, you’ll begin to see your debt go down, which is exciting. This excitement will give you momentum to keep going and get out of debt fast. Once you’re out of debt, continue in the habit of staying out of debt.
3. Check in on your finances regularly (I do it weekly)
Set up a time where you review your finances regularly. This can be every day or weekly. Put it on your calendar as a reoccurring event. This way, you’ll know that’s the time where you review your budget, income, spending, etc. It’s the time where you make sure you’re being intentional with your money and in control of your financial foundation.
4. Use cash / debit (avoid carrying a credit card balance – ever)
Instead of using your credit card, get in the habit of using cash or your debit card. Being in the habit of using only the money that you have will change your mindset to one that only pays for things when you have the money in the bank. You won’t even have the option of using money that you don’t have if you pay with cash or a debit card. Being in the habit of only buying things when you have the money will put you on track for financial success.
I am 28 years old and I’ve never had a credit card – ever. It’s never really crossed my mind. That in and of itself is proof that it’s possible to have a different mindset than the mainstream.
If you do choose to use credit cards, make sure you’re in the habit of paying off your bill every single month. It’s never good to carry a credit card balance. (Carrying a balance regularly would be an example of a bad financial habit.)
This is a guest post I’m writing on the Creative Savings Blog. See the full post here.