Money Habits to Take Into 2023
1. Spend Less Than You Earn
This is a tale as old as time. If you earn about
$5,000 each month, but spend up to $10,000 each month, you need to take a
step back and reevaluate your financial choices. Are you splurging on
expensive items each week? Are you maxing out your credit cards? If you are
spending more than you earn, you will never build a savings or an emergency
fund. Take a step back and assess where your money is going. Cut down on
spending and focus on paying for the essentials first. Make sure your bills
are paid and up to date, pay down credit card or loan debt, and make sure
you are setting money aside for your savings and emergency funds.
Once you get back on your feet, take a look at your savings
and emergency funds. Is there enough money saved up for 6 months? If there
is, consider investing any surplus money you have. We know not everyone is in the financial position to invest any surplus money, but if you are, investing is a great option to start building your wealth.
2. Pay Yourself First
The key to being financially healthy is by paying yourself
first. Set aside a little bit of money from each paycheck and try to save
every week, every two weeks, or every month. Find a rhythm that works
for you and your finances and won't leave you scraping for change. To make saving easier, set up automatic transfers! You can
schedule when the transfer will be taken out of your Checking Account and
deposited into your Saving Account.
3. Be Intentional About Your Purchases
Any time you're out shopping, remind yourself that you don't really need everything you see. If you want to buy something, think about it for a week. If you still want the item after a week, buy it. You can also make a pros and cons list for the item to see if the pros outweigh the cons. Check your storage to see if you don't already have the item, or something similar, before you make a purchase. Delaying gratification is one of the steps in creating wealth.
4. Think Long-Term
Apply this way of thinking when you invest money. We all know the market has its ups and downs, so by default, the money you've invested will also follow this pattern. Tracking your investments every day is a sure way to give you a headache, so instead, think long term! By the time you retire, the couple hundred dollars you invested will have turned into thousands of dollars that will let you retire comfortably. Avoid the headache and just know that your investments will have multiplied by the time you retire.
5. Track Your Finances
We may have told you NOT to track your investments every day, but that doesn't mean you should ignore your day to day finances. Do you know where your money is going every day? Do you have any subscriptions that you don't use anymore that are still being charged to your account? Are you getting the best deals when you shop? Create a budget and set some time aside to sit down and look through your finances. Calculate how much you are earning, and how much you are spending each month. You may discover there are unused subscriptions that are silently draining your bank account!
We suggest you set up Alert Notifications for all your accounts to be notified when money is taken out. You can set the alerts for as little as $0.01 and your phone will be notified when a transaction is made. This helps you keep track of your spending and keeps you on alert if your cards have been hacked.
6. Educate Yourself
Financial education isn't taught in school, even though it should be, so that is why you need to take the initiative to read blogs and follow people on social media who teach financial education. Knowing what credit is, credit score, annual percentage rate, interest rates, and more, can put you ahead of the game when it comes to being financially healthy. It will be a slow process, but remember, the tortoise didn't beat the hare by going fast.
7. Talk to Your Children About Money
If you want your children to avoid making the same mistakes you did with money, talk to them about it! Financially educating your children at a young age can set them up for success. For example, you can let them see how much they can buy with only $5. This teaches kids the value of money and lets them know that sometimes we cannot afford to buy them that really expensive toy they want. Once they understand the value of money and the hard work it takes to earn money, they will be financially mature and ready for the next steps.
New Horizons CU offers youth accounts for children and teenagers that provide financial education tools like Biz Kid$ and a quarterly newsletters to help them learn along the way.
8. Manage Your Debt
Rule number one to managing debt is not spending more than you can pay off comfortably. Rule number two is paying more than the minimum balance. You can try different payment methods that best fit your lifestyle to tackle that debt. Try a no spend challenge every once in a while to help you pay off your debts, and see if there is a way to consolidate debt so it's all in one place and easier to manage.
9. Stick to Your Plan
The best goal you can make this New Year is to stick to a financial plan. You can review this plan as your finances change, but always try to stick to your plan! You can also make small financial goals like saving a certain amount by a certain date to motivate you to save. You could also plan to pay down debt that has been looming over you for months. Whatever plan you make, just make sure you stick to it!
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