Building smart money habits into your daily routine is key to securing your financial future. No matter how much money you have today, resources are not unlimited therefore if you splurge without care or a plan to sustain that flow of cash then sooner or later you will run into financial difficulties. It pays to be in touch with your financial realities by constantly asking yourself:
- How much money am I making and what exactly am I spending on?
- Is this the best use of my money?
- How can I do better?
- Are there other good cost-friendly alternatives to what I am about to pay for? etc.
You’ll be surprised how far a little change in how you handle money can take you. Here are my top 5 smart money habits to stay in control of your finances.
1. Spend less than you earn
It is not practical to spend on things that you cannot afford – this is a clear recipe for debt. A smart money habit rule of thumb when planning my budget for the month is to first set aside money to save or invest. Afterward, I allocate the balance to other areas of need. Cut or reduce nonessential spending, so you don’t exhaust all your income. When you build a habit of spending less than your income every month, you increase your chances of being able to save monthly. Use the Moolah Budget Template to start your budgeting journey.
2. Prioritize and plan your purchases in advance
Having a clear outlook of all my spending categories for the month helps in planning for them. Basic things like feeding, utility bills, transportation, dinner dates with my husband, support to family, shopping, etc. Instead of spending on the whim or as the need arises, make a plan (budget) at the beginning of every month allocating portions of your income to different areas of need based on clear priorities. Things critical to survival and quality of life are essential needs and essential needs should be prioritized over wants or good-to-haves.
3. Take stock of your daily spending habits
Keeping track of what you spend daily may seem like a lot of work, but this smart money habit is an eye-opener. You will not realize how much you are spending on unimportant or non-essential stuff until you start to keep records. Tracking the things you spend makes it easier to project how much you need to survive in a month.
4. Build and maintain an emergency fund
Everyone needs an emergency savings. This is the reserve you will draw from when in a crisis or when life throws a curveball at you. Simply put, it is money you keep aside for unexpected expenses like medical bills, job loss, unexpected car, or house repairs, etc. Start small to build your financial safety net. Save at least one month’s worth of expenses in a separate untouched but accessible account. Grow this figure with time to cover at least six to twelve months’ worth of expenses.
5. Have open money conversations with your spouse or partner
Normalize having smart money habits conversations with your significant others, kids, family members, and even your friends. Schedule monthly budget date nights, take out time at least monthly to review your expenses, and budget for the next month. When you teach your kids about budgeting, saving, and investing, you are laying a solid financial foundation for them.
Not sure where or how to start? Book a 1:1 personal budget session with me to get hands-on help.