Are you living paycheck to paycheck? Does it feel like no matter how hard you work, you can never quite seem to catch up with your financial obligations? It’s an all-too-familiar story, but here’s some good news: With some smart money habits, you can put an end to the vicious cycle–and no, it doesn’t involve getting a six-figure income. Even if you have a fairly modest salary, tried-and-true smart money habits can help you turn things around. Like any habit, though, these take time. Adopting them for a week or two won’t work. You must put them to use consistently and persistently to reap any benefits. Eventually, they’ll become like second nature. Down the road, they’ll help you achieve a life free from finance-related stress.
Adopt These 10 Smart Money Habits Today
A quick online search turns up a glut of advice about managing money effectively. We’ve handpicked 10 of the best smart money habits to make things easier for you:
- Track Your Spending – If it feels like money just slips through your fingers, you probably don’t track your spending. The sooner you start, the sooner you can identify areas where you are spending too much. It’s amazing how quickly seemingly minor purchases add up. For instance, many folks are shocked upon seeing how much they spend on Starbucks runs in a single month. Track your spending in a regular notebook or, for more convenience, use one of the many apps that can automate much of it for you.
- Automate Your Savings – Like many people, you may feel like you can’t afford to save money at all. If you treat those contributions to your savings account like bill payments, however, you may start to see things differently. If you already have your paycheck automatically deposited in your checking account, switch it so 5 to 10 percent is put into savings. Pretend the money doesn’t exist so you won’t miss it. Add this to your list of smart money habits and you’ll be surprised by how quickly your savings balance grows.
Save Up for Big Purchases – Tempting though it may be to use a credit card to pay for that upcoming vacation or other fairly major purchase, it’s one of the best ways to end up in over your head. Instead, use a service like Smarty Pig to save up using cold, hard cash. Start saving as early as possible. That way, you can make fairly small contributions over a longer period of time. It feels great to be able to pay for something with cash, and it helps you become better at managing money too.- Nip Financial Problems in the Bud – Everyone experiences tough financial times at some point. People who emerge relatively unscathed are the ones who deal with them head-on with smart money habits. Those who stick their heads in the sand and hope the problem magically goes away are the ones who end up filing for bankruptcy. If you can’t pay a bill on time, be proactive and call the lender before your payment is late. Most companies are willing to work with customers because it’s much easier and cheaper than sending collections after them. You may even be able to avoid late payment penalties by doing this.
- Be Smart with Credit Cards – Credit card debt is one of the most common causes of finance-related stress. With that in mind, use yours sparingly. When you do use them, pay off the balances in full every month. Use cards that have great rewards points programs to sweeten the deal. You will earn the points but, by paying off the balance every month, you won’t accrue any interest. That’s how you make credit cards work for you.
- Pay Bills On Time – This may seem like a no-brainer, but it’s amazingly easy to put off paying one bill to pay for something else. This quickly turns into a vicious cycle that results in you robbing Peter to pay Paul. What’s worse is it typically results in exorbitant late payment penalties, which add up quickly too. If you often forget when bills are due, use an app like Mint to stay on track. It will alert you when a bill is almost due. Helpfully, it will also let you know when you have been charged interest or penalties.
- Use the 48-Hour Rule – One of the biggest financial mistakes you can make is buying something frivolous and not having enough money left to handle your financial responsibilities. You can ward this off by employing the 48-hour rule. Whenever you are tempted to buy something that’s out of your budget, wait 48 hours before acting. More often than not, you will lose interest in the item during this “cooling off” period. Decide on a number, and implement this rule whenever you are thinking about buying something that costs that much or more. When paired with other smart money habits, this one will help you be more responsible with the money you have.
- Negotiate Prices – We may not live in a culture where haggling is a thing, but that doesn’t mean you can’t–or shouldn’t–negotiate your way to better deals. While you probably won’t get anywhere by asking for a lower price at Target, you can often get better prices from car repair shops, cable companies, handymen and others who provide various services. At any rate, it never hurts to ask, and every little bit helps.
- Use Coupons – You don’t have to be an extreme couponer to save significant amounts of money with coupons. Most major grocery store chains have online coupons that are linked to a rewards card. The same is true for many other retail establishments too. Indeed, the days of sitting down and clipping coupons are largely over. Instead of painstakingly selecting coupons for things you will buy, load all of them to your card. If you happen to buy something that has a coupon, you will save a little extra money. If you have the time, you might also still check the weekly circulars. They can help you save even more.
- Use Cash – These days, most people pay for virtually everything with credit cards and debit cards. Even if you only use the latter, swiping a card instead of handing over actual cash is a good way to overspend. It just doesn’t feel as much like “real money” when it’s deducted from your account with a debit card. At the start of every week, withdraw the cash you know you will need. Sort it according to how you will spend it. For instance, you might have envelopes for gas money, restaurant money, coffee and the like. Once an envelope is empty, you’re not allowed to spend more on that category until it’s replenished the following week.
From making the most of credit card reward points to using cash in lieu of plastic, these smart money habits are sure to turn things around for you. Just remember: They don’t work instantly. They need to become actual habits, which means you employ them faithfully and without having to think about it. Once you get to that point, these smart money habits will be making an active difference for you and your finances.