By Lee Rawiszer,
When it comes to habits for protecting your financial security, there are basic monetary behaviors that you should adopt to ensure you have enough money now and in the future. Follow these healthy financial habits and you’ll get on the right track to a more solid financial future.
1. Do pay yourself first
When it comes to dispersing your money on a monthly basis, make sure you take care of your savings obligations first. In other words, pay the money you have committed to your savings and future, i.e. college savings plans for your kids, retirement accounts, etc. before you pay your regular expenses. If you have to alternate which savings plan gets the first contribution, do what works for you. By paying yourself first, you are building good personal finance skills, as well as a buffer for future expenses (college, emergencies, retirement).
2. Do set goals and measure progress
The best way to succeed financially is to create attainable goals and stay on track to achieve them. Setting and achieving goals puts you in charge of your money and your life. It helps you save for and realize important events like retirement and college, or fun things like vacations or new real estate.
3. Do establish an emergency fund
What will you do if a tree falls on your roof, you get into a car accident, or have unexpected medical bills? The expense of unforeseen circumstances, especially if an accident means being away from work for a period of time, can negatively affect your financial situation for much longer than necessary. Set aside money each month in an emergency fund to cover surprise scenarios.
4. Do establish retirement funds
If your employer offers retirement programs take advantage now. Put as much as you can afford into these accounts and your money could grow over time, especially if your employer matches your contribution (up to a certain percentage).
5. Do automate withdrawals
Automating withdrawals from your account into various savings and investment accounts is the simplest way to ensure that you continue to take the right steps to a successful financial future. Whenever possible, set up automatic monthly disbursements of your funds to the appropriate accounts. This will ensure that you pay yourself first. And you save time scheduling that transfer so you can be out enjoying your money elsewhere.
6. Do study your bills for errors
How often do you pay your credit card bill without reviewing your statement line by line? Many of us don’t take the time to thoroughly study our bills, but by not doing so, we risk paying for charges that aren’t actually valid. Pledge to never pay a bill before reading it from beginning to end — you’ll reduce your chances of overpaying.
7. Do periodically review your credit report
If you’re one of those people that never check their CRB listing, then it’s time to change your ways. For starters credit reports do sometimes contain errors, and if you don’t take steps to correct a mistake on your record, it could end up dragging down your score, making it more expensive to borrow in the future.
You’re entitled to a free copy of your credit report every year. Take advantage of that. This will also help you avoid falling victim to identity theft.
1. Do not live on high-interest credit
Borrowed money is just that, borrowed. Whenever you pay off a loan you will have paid back more money over time than you originally borrowed and spent. Avoid high-interest credit. Living on credit is counter-intuitive to those solid financial skills we are trying to sharpen.
2. Do not spend recklessly
It’s hard to live on a budget if you don’t track the money you’re spending. Pay attention to the where and how when you spend money so you can live within the guidelines of your budget. If you pay yourself first and prioritize the remaining money, you can still set aside a “mad money” stash to fulfill your need to spend.
3. Do not skip savings
Spending all of your money now and ignoring the need to save is irresponsible. It is inevitable that you will need money in the future for foreseeable reasons and there will also be unexpected occurrences in your life that will require financial attention. Don’t risk financial distress by failing to set aside an emergency fund and don’t postpone retirement in the future because you didn’t save enough of the money you make now.
4. Do not ignore your credit score
Your credit score is a report card on your financial health. A high credit score gives confidence to lenders and typically will land you a better interest rate when borrowing money. Conversely, a low credit score ensures that you will pay higher interest on borrowed money, if lenders make it available to you. Know the ways your credit score can be negatively affected, such as late payments of loans, defaulting of HELB payments and more.
This article was originally published in Expert Beacon.