There are several important financial habits everyone should develop in order to live a debt-free life. In fact, taking control of your money is a must, especially if you want to improve your personal finances. Follow these tips for developing good financial habits that can change your entire life.
Table of contents:
- Never buy anything on impulse
- Deposit money into a savings account monthly
- Don’t use credit cards
- Have money for splurging
- Lower the housing expense
- Make an extra mortgage payment yearly
- Use a credit card that offers rewards
1. Never buy anything on impulse
One of the most important financial habits you should develop is never buying anything on impulse, even if you find a wonderful sale. Just leave that thing in the store and go home.
Once you leave the store, you’ll forget about it. But if you won’t, ask yourself “Do I really need it?” If you do, purchase it, of course, if you can afford it.
2. Deposit money into a savings account monthly
You should also develop a habit to deposit money into your savings account on a regular basis. You might get into a dull routine of paying your bills and forget about your savings account. A job loss, a car repair, and an illness are some of the important reasons why you should save money. Try to set aside at least 10% of your paycheck every month in order to meet your future financial needs.
3. Don’t use credit cards
While credit cards are easy and convenient, they can quickly get you into big trouble. A credit card helps you establish good credit and you can keep it for emergencies. But, use it only if you can pay it off within two or three months.
4. Have money for splurging
Since you work hard, there is nothing wrong with spending money on yourself. Every paycheck set aside a specific amount of cash for splurging. Just make sure that it’s not a lot, otherwise, you may end up overspending. Use that amount of money to enjoy a massage, get your nails done, or buy several inexpensive things.
5. Lower the housing expense
This is a financial habit that everyone should adopt. If your mortgage or rent is over 28% of your gross income, consider downsizing. If most of your paycheck goes to the house payment, you won’t have money for savings or entertainment.
6. Make an extra mortgage payment yearly
One extra mortgage payment yearly will pay off your loan about 8 years sooner. This means you will pay off your debt quicker and save on interest charges. Try to make a double mortgage payment each year, or increase every mortgage payment by 1/12. This is a great way to pay off your debt earlier and live a debt-free life.
7. Use a credit card that offers rewards
If you don’t want to carry around cash and you like to use your credit card for your purchases like gas and groceries, try to get a credit card that offers special rewards. For every dollar you spend, you can get points and redeem them for travel, gift cards, money, a statement credit, etc. But don’t forget to pay off your balance monthly.
To develop good money management, you don’t have to be a professional financial expert. Just avoid doing common financial mistakes and your life will definitely be debt-free. What financial habits have you already developed?