Achieving financial stability requires discipline, good fortune, and developing the right habits. Money can leave you psychologically and emotionally drained, but instilling the appropriate practices can set you on the path to success.
Forming a new habit can be difficult, but there are scientific approaches you can take. Consider following the advice of Charles Duhigg, author of The Power of Habit, and create a cue that triggers a habit and a reward for after the action is completed.
Not sure where to start? Try one of the eight smart money habits below.
- Track Your Money
Spending less than you earn is an essential step on the path to financial stability. You’ll need to track your money to understand just what’s getting spent where and how much is left over each month. Tracking makes it easier to identify places where you can cut back and to quantify how much you save each month.
- Look for Savings Opportunities
If you’re tracking your money, you know how much you spend on lunch, entertainment, and rent each month. Always keep an eye out for savings opportunities sand learn how to negotiate your utility, phone, cable and other bills to reduce your expenses.
- Save Money on Food
Learn how to save money on food – it’s an expense you’ll have for the rest of your life. There are all sorts of ways to save money on food. You can save when buying groceries, storing food, and planning meals. Remember, throwing away food is just like throwing away money.
- Focus on Paying Down Debts
Some people wind up in debt and quickly get overwhelmed. Rather than facing it head on, they make minimum payments and ignore the rest of the amount owed. But, if you’re under a pile of debt you’ll never be financially stable.
Take your head out of the sand and address the debt head on. Figure out a plan for paying it off ahead of time. Consider cutting back in some areas, or making more money with an additional job, and then strategically apply the extra money to the loans.
- Develop Self-Discipline
Financially stable individuals shop smartly and have control over their spending. Retail therapy may be coping method when you feel stressed, but the relief is temporary. If you want to spend money this way, set a reasonable spending limit and stick to it.
In general, ask yourself if you need something before checking out. Buying “wants” rather than “needs” is okay, but don’t be lured into buying something you don’t need just because it’s on sale.
- Check Your Reoccurring Expenses
Make a habit of checking your subscription services several times a year. Make sure you’re getting the full value for curated boxes of treats or clothing, magazines, and cable. Could you cut off one of the subscriptions and pay less for a similar result? Or, can you negotiate a lower rate with the service provider?
Check your insurance rates throughout the year as well. You may be able to change rental or homeowners, life, and auto insurance policies at any time during the year. Making a change could significantly lower your ongoing expenses.
- Invest for Your Future
You might think you’re too young to worry about retirement, but the earlier your start, the better. Over time, the amount you save can grow into a significant retirement fund. You don’t know what the future will bring, but by investing you’ll help prepare your future self for financial difficulties.
- Consider The Value
Rather than just looking at a price tag, consider the long-term value of a purchase. Sometimes neither the cheapest nor the most expensive options are best. A middle-ground product that provides the features you want at a reasonable price might be the best way to go. With some purchases, it makes sense to spend more if the product will last a lifetime.
Also, consider passing on new toys and gadgets altogether and buying experiences instead. The anticipation, activity, and memory could be priceless.