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Are you adopting smart money habits so you can grow healthy, wealthy and wise?
When it comes to your finances, the patterns you create with your money can make or break you.
Some habits are ones you consciously develop. Others are ones you just kind of fall into.
But either way, they can have a big impact on your finances. So it pays (literally) to know what you’re doing when it comes to your money.
Stumped on which habits you should be developing to grow rich? I’ve got ya covered!
9 Smart Money Habits to Improve Your Finances
Before we dig into the list, here’s something you should know: I love money.
Not in a Scrooge-McDuck-swimming-through-a-vault-filled-with-gold kind of way, though. More like a money-is-a-tool-to-use-wisely kind of way.
So because I love and respect money, I’ve fine-tuned how I manage it.
That’s helped me to:
- Save half my income consistently for the last four years
- Contribute money regularly to my retirement account
- Build college savings for my kids
- Buy a home
- Pay off all my debt, except my mortgage
- Grow my freelance writing income to multiple six figures
- Go from negative net worth to a six-figure one
Does any of that sound good to you?
If you said yes, then start putting these genius money habits to work!
1. Track Your Spending
This is such a simple thing but 59% of Americans don’t keep track of their expenses.
That is just insane to me. I mean, how are you going to manage your money and grow wealth if you have no idea where it’s going?
So, the first money habit you need to develop if you haven’t yet is tracking your spending.
That means every dollar you spend, even for small purchases.
Here are some different ways you can track spending:
- Recording your expenses in a spreadsheet
- Writing them down an expense tracking worksheet
- Using an app or software
It doesn’t matter so much which one you choose. What’s really important is getting into the habit of tracking what you spend consistently.
This can help you with tackling money habit #2.
You might also like: Take the No-Spend Challenge to Get Your Budget Back on Track
2. Budget, Budget, Budget
Budgeting gets such a bad reputation and I really don’t understand why.
A budget is just a plan for how you spend the money that comes in each month. Having one was super important when I became a single mom and was living on a tiny income.
(And if you’re clueless about how to make a budget, check out this step by step tutorial.)
There are a ton of different budgeting systems you can use. For example, you might try:
- Cash envelopes (or if you prefer digital, you can use an app like Mvelopes)
- 50/30/20 budgeting (budget 50% of income for necessities, 30% for wants and 20% to savings/debt)
- Zero-based budgeting
- Budgeting with a spreadsheet
- Using an app to budget
Again, the budget system you choose isn’t as important as sticking with it.
Pick a day each month to sit down and review your budget. Block off at least an hour you can devote to going over your income and spending. Then add a reminder to your calendar.
As you review your budget, compare your last month’s income to the current month’s. Then, go over your spending line by line to see what’s changed.
3. Make Saving Part of Your Budget
“Pay yourself first” is the mantra of many a financial expert (myself included).
When you pay yourself first–meaning, putting money into savings before you pay bills or spend on wants–you can’t shortchange yourself, literally.
Because listen, nobody’s going to save money for you. So taking money right off the top every payday is one of the best money habits to get into to grow wealth.
Go back to your budget again. Did you add in a line for savings?
If you said no, then let’s see where you can find some money to save.
Go over every expense in your budget. Where can you cut back or cut out expenses?
Here’s a tip: it’s not always the big expenses like rent or utilities that are the budget-killers.
Sometimes it’s the small things that get you, like subscription services or bank fees. Luckily, you can use an app like Trim Financial Manager to avoid getting nickel and dimed.
Trim reviews your spending habits, cancels subscriptions you don’t need and helps you find better deals on your other expenses. Easy peasy!
Look at it this way: every penny you don’t spend is money you can add to savings. And even small amounts can add up.
Say you’re able to cut your spending down by $100 every month. You stick that cash in a savings account earning 2%. After 20 years, you’d have just shy of $30,000.
Not too shabby, right?
Those are 30,000 reasons to make paying yourself first one of your go-to money habits.
4. Automate Your Savings
Automation is the best thing ever, seriously.
All of my bills except one are on autopilot. (And of course, without fail I forget to pay it on time every month.)
Automating also works great for saving money and (hopefully) growing richer.
There are some crazy simple ways to automate your savings:
- Ask your employer to direct deposit part of your paycheck into your savings account.
- Schedule a recurring transfer from checking to savings every payday.
- Use a money-saving app.
Now, I don’t get direct deposit from an employer since I run a business. But if you do, then it’s definitely something to consider. It’ll make your efforts to save so much easier.
Scheduling recurring transfers is also a great, low-stress way to build up your savings. When I was a married SAHM and my husband was the breadwinner, I had savings transfers set up so every payday we were stashing a little something away.
Apps are my personal favorite for managing money. I like to be able to see what I have coming in, what’s going out and where it’s going from my phone.
There are two apps that can help you get into the savings habit automatically:
Digit makes saving money totally painless.
Here’s how it works:
- You link your checking account to the Digit app.
- The app analyzes your spending patterns to find small amounts of money you can safely save.
- Once those amounts are found, the app transfers the money to a Digit savings account.
Simple enough, right? And if you’re struggling to get into the swing of savings, easy is your best friend.
So, here’s a big mistake you might be making when it comes to your money:
Assuming that saving and investing are the same thing.
Both of them involve putting money away for later but investing is the better way to grow wealth. Sure, investing can be riskier than just sticking money in a savings account but you could see a bigger return for your efforts.
Cue the Acorns app.
Acorns is a spare change investing app. You link your bank account and Acorns rounds up purchases, then invests the difference.
You can invest with pennies and grow a portfolio. To me, that’s genius considering how many people don’t invest because they think they don’t have the money.
Acorns doesn’t charge any trade fees or account minimums. If that sounds good, head here to open your account and get $5 to start investing!
5. Follow the 48-Hour Rule
Impulse spending is one of the worst money habits you can fall into. Because it’s so easy to spend money without planning it or even thinking about it.
The bad news is that impulse spending can eat away at your budget, leaving you with nothing to save.
And nobody’s going to get rich that way, right? (Well, except maybe whoever you’re handing your money over to.)
So, how do you break the impulse spending habit?
One trick that works well for me is imposing a 48-hour wait period on bigger purchases.
It’s a simple enough rule. If there’s something you want to buy, you wait 48 hours before pulling the trigger.
That’s long enough to decide whether you truly need, want and can afford whatever it is you’ve got your eye on.
I’m not the type of person who’s super into stuff anyway (other than books) so this rule works well for me.
If you’re still overspending even with the rule, here’s a tip I picked up from Kari at Money for the Mamas: calculate your real hourly wage.
What’s Real Hourly Wage?
Your real hourly wage is what you make after taking out taxes and any expenses you have to pay to go to work, like daycare or gas.
So if your job pays you $20 an hour and half of that goes to taxes and expenses, then your real hourly wage is $10. You then use that as a guide for spending.
Specifically, before you buy something you ask yourself how many hours you’d need to work at your real hourly wage to afford it. So, a purse that costs $100 would require 10 hours of work, using the $10/hour example.
It really helps put your spending in perspective and figure out the difference between needs and wants.
6. Use Banking Alerts
Banking alerts can be a lifesaver and a money-saver.
I’ve sidestepped credit card fraud more than once thanks to alerts. But you can also use them to help you grow your savings.
First, you can set up alerts to track debit and credit card purchases.
This is helpful because spending with a debit or credit card doesn’t have the same psychological impact as spending cash. Spending cash is painful but swiping a card doesn’t have the same sting.
Setting up an alert for every purchase is a reminder that you’re spending actual money, not pretend money floating around in the ether.
Next, you can set up balance alerts on your cards.
With your debit card, you want to set up a low balance alert. This can let you know when your balance drops below a certain point so you know to put the brakes on spending.
With your credit card, you’d want to set up a high balance alert. That’s also a signal to stop spending and work on paying down some of what you owe.
Together, these alerts can help you keep your spending in check. And those kinds of money habits are what you want if you’re trying to pile up savings.
7. Boost Your Money IQ
So, as a freelance writer, I’m a recognized expert in the finance niche. Big companies pay me gobs of cash to write about money.
But that doesn’t mean I know everything there is to know about it.
I’m still learning about money and finance all the time. For example, I recently got a crash course in trading options for a piece I had to write for an investing platform.
And if you’re serious about making the most of your money, learning about it should be one of the money habits you cultivate.
My favorite way to learn about money is by reading finance blogs and websites. But you might prefer finance books or podcasts about money.
It really doesn’t matter how you learn as much as it does that you learn.
So try to block off 30 minutes to an hour every week that you can spend learning about money. If you feel like you don’t have time for it, think of it as a kind of financial self-care.
8. Be a Money Goal-Setter
If you’re not setting goals for your money, you’re completely missing out.
Because it’s not enough to just say you want to save more money or grow wealth. There has to be some action that goes along with it.
That’s where goals come in.
When you have a goal (or two, or three or 10) for your money, it’s easier to define the action steps you need to take to get there.
And you want to make those steps as specific as possible.
So if you’re trying to save $10,000 for emergencies or pay off $5,000 in debt, break it down.
- How much money can you put towards your goal each month right now?
- Can you find any extra money in your budget to help your goal along?
- What’s your time frame for achieving your goal?
- How will you measure your progress towards your goal?
Digging into the details makes you more invested in your goal. (Pun totally intended.)
And when you’ve got the steps laid out right in front of you, it’s so much easier to stay motivated.
9. Get Creative With Your Income
Whoever invented this whole making money online thing is honestly a genius.
I, for one, am all about running businesses from home and working online side hustles to make money.
And paying attention to what you make is important if you want to really get on the path to riches.
Listen, I know money isn’t everything but it definitely makes having the kind of lifestyle you want easier.
So, if you’re not into growing your income and making more money, then just skip on to the end. But if you’re cool with earning a bigger paycheck, then think about what you can do to make it a reality.
Could you start a side hustle?
Or you have some completely different idea for an online business?
I like online money-making ideas because working from home is an absolute dream. But if you’re committed to a career path in the real world, then consider how you could level up your earnings.
That might mean asking for a raise or promotion at your current job. Or maybe you’re thinking of looking for a new job altogether.
Earning more money, whether you do it online or off, can help you get one step closer to wealth.
Which Money Habits Do You Use to Improve Your Finances?
I hope you’ll put some of these tips to work if you aren’t already–I know from experience what a difference they can make in your financial life.
Do you have a killer money practice you follow? Head to the comments and tell me about!
And please pin and share this post if it helped you!