Good personal finance doesn’t need to be complicated. To develop good personal spending habits, follow these ten tips for financial success:
1. Keep detailed records.
One of the traits of financially-successful people, whether they make 10K a year or millions, is that they are detail-oriented and know where every penny goes. They know what bills have been paid, how much they spend on necessities, where disposable income goes, and what they have in savings and investments. Keeping good records doesn’t need to be time-consuming. Set aside just 30 minutes every week to go over your spending, record receipts, and track your savings.
2. Save the first 10% of your income.
Before you do anything else with your money, stick some in savings. At least 10% of each paycheck is what financial planners suggest, but if you can’t pay bills and put away ten percent, decide on a weekly/monthly allowance you can afford and commit to socking it away each check. This tip will actually provide multiple benefits including extra money to for emergencies, liquidity to pay of credit cards and other debts you might have or also when you file your taxes or if you file tax extension.
3. Make a budget and stick to it.
Financial success means living within your means. If you don’t have the money, don’t spend it (that means no credit cards). If you’re spending more than you make, cast a critical eye on where your money goes and cut back wherever necessary.
4. Prioritize your spending.
Priority spending means ranking all expenditures by importance. Save and pay bills before spending on wants, and when you do shop, save for what you really want. What is more important, a family night out or junk food at lunch? Thinking about what you really want helps you set goals and stick to them.
5. Have an emergency fund.
An emergency fund should be separate from your savings, and should be equal to several months’ income. It is only for true emergencies, such as layoffs, unforeseen medical care, dire home/car repairs, etc.
6. Lower utility usage to reduce monthly bills.
Why spend more on monthly utilities than you need to? Conserving electricity, gas, and water and reducing household trash is one of the easiest ways to reduce expenses, and it’s environmentally-friendly. This also includes getting rid of features on your cell phone/TV/internet plan that you don’t use and avoiding going over your minutes or buying pay-per-view.
7. Develop a source of passive income.
Whether it’s a vending machine you own, a CD or high-yield savings account, or good investments, learn how to bring in extra cash with minimal effort. This can be stashed in savings or an emergency fund, used to pay off old debt, or as fun money.
8. Don’t buy on impulse.
Impulse buying can blow your budget before you even realize it. When shopping for household items, stick to a list made beforehand with your budget in mind, no matter what specials or discounts are advertised. If you use a credit card make sure to control the temptation of an impulse buy. If you can, read up on credit card blogs for ways to control spending when using purchasing with credit.
9. Don’t keep large amounts of cash on hand.
“Cash” includes the debit/credit card and checkbook. When window-shopping, leave them at home. Don’t take more money than necessary to the grocery store, and don’t have large amounts of bills sitting in your wallet. Set up an automatic debit from your account to pay monthly bills (on payday or the day they’re due).
10. Be smart about frugality.
Coupon clipping, buying in bulk, and comparison shopping are wonderful spending habits, so long as they actually save you money without a lot of time investment. Think through all frugality schemes to make sure you are actually saving money, not just wasting time.