Are you as concerned about your financial health as you are about your physical health? Both areas of life are vital to living a long, enjoyable life, but sometimes our financial health isn’t as robust as it could be because we’re not clear on how to get it in shape. We’ve got five healthy financial habits to help you improve the health and fitness of your finances.
1. Know What You’re Paying
This might sound like common sense; just read the price tag, right? Not always. Too many times there are hidden fees we don’t consider, or don’t know about, when making a purchase. In fact, according to a recent Consumer Reports survey, 85% of Americans have been hit with a hidden fee, and almost two thirds of those said they’re paying more now in “surprise” fees than they did just five years ago. How can you avoid these nasty surprises? Scrutinize that bill when it arrives! Look for anything suspicious, or any fees that weren’t pointed out or explained to you when you signed up for a service such as satellite or cable television.
2. If You Borrow, You Can’t Afford It
Your parents or grandparents may have lived by the principle of paying cash for everything. If they didn’t have the cash, they didn’t make the purchase. You might think that’s an old fashioned way of thinking, but your parents and grandparents likely didn’t carry any debt beyond a house payment and maybe a car payment. Credit card debt did not become a thing until the 70s, believe it or not. BankAmericard was the first licensed “general purpose” credit card, but those weren’t issued until 1966, although a decade earlier Bank of America did begin mailing unsolicited credit cards to certain California markets.
3. Pay Your Bills On-Time or In Advance
When you do get those credit card bills, do your best to pay them in full every month. Interest charges and transaction fees can add dollars to your bill that makes it harder to pay off, so it’s best to plan your credit card purchases in advance and set the cash aside, either in a separate account, savings, or even an envelope if that’s what works for you. With online billing and bill pay so easily accessible today, there’s no reason you should ever have to pay a late fee if you pay your bills in advance. Schedule your payments for three to five business days in advance of their due date, and even with banking holidays your payments should process by the due date.
4. Track Your Spending
Do you know where your money is going, or do you just think you know? The only way to truly take control of your finances and trim the fat in your budget is to track where you spend your money. One of the first reactions people have when they begin to track their spending accurately is to dial down their impulse purchases. Tracking your spending is the first step to understanding exactly how well (or how poorly) you are managing your money and taking back control of your budget.
5. Save for Specific Goals
Having a budget is a great way to not only see where your money is going and control your impulse spending, it’s also a great way to save. Once you’ve put your fixed expenses down on paper (or in a budgeting app), you can see what’s left over and decide how much you want to sock away for a specific goal, like that vacation you’ve been longing for, that nagging bill you really want to get rid of quickly, or the thing that needs repairing that you’ve been putting off. You’ll be proud of yourself as you watch the fund for that specific goal grow every month, and the discipline you’ll develop as a result of saving to reach that goal will transfer into other financial areas, like not applying for another credit card!
Work these five healthy habits into your money routine and before you know it, you’ll have finances that are strong, healthy, and fit. Knowing what you’re paying, avoiding borrowing money to pay for purchases, paying all your bills on time or in advance, tracking your spending, and saving for specific goals will put you back in the driver’s seat of your budget, build confidence, and give you a sense of control over your money and your future.