5 important money habits you need to have good finances

5 Important Money Habits You need to Have Good Finances

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We know we have to keep repeating something until it becomes a habit, exercising, meditating, eating well, going to bed earlier. The same applies to good financial habits, which are important for financial success. Here are 5 money habits you need to grow in order to have good finances long-term.

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Good finances: Habits you need for ultimate financial success

Saving money isn’t everyone’s cup of tea but there are so many reasons to develop good financial habits.

If you want to run a business without it going bankrupt, you need to pay close attention to your money flow.

Maybe as a family, you decided that one of you would stay home with the kids and you became a single income family. You need to make that smaller household income go further.

You might be a single mother caring for two young kids on your own. Learning good money habits will make all the difference in whether you have good finances or total stress every time you need to pay a bill.

Related reading: 20 Flexible stay-at-home mom jobs that pay well

Moving from bad to good finances

Money is like energy but we need to have a plan to know where it comes from and where it goes. We have to shift to managing our money (which doesn’t have to be time consuming) instead of being a passive bystander to the money flow.

It matters less how much you earn; your spending and saving are even more important. There are people who live in big houses in nice neighborhoods who spend way more than they earn. Doctors and lawyers can be over their heads in credit card debt. There is no one type of job or person who is immune to bad money management.

I know it’s so easy to spend on things like clothes, grocery, entertainment, toys for our kids, coffee (ahem, me)…

We might know we have some bad financial habits, but we feel stuck and don’t know where to start to get to good finances.

It’s possible to break the cycle of living paycheck to paycheck. Bad money habits, just like any habits we want to change, take some effort to change.

But it’s so worth it when you see your debt going down, or the money you’re saving in an emergency fund going up.

Find out how we paid off our mortgage early – even on a low income

You can become that woman who has her sugar together, and isn’t counting down the days until her next paycheck.

Curious to know what these good financial habits are? Let’s get to it!

5 Important money habits you need to have good finances

1. Have a monthly and weekly budget plan.

Carve out a day or even an hour or two to plan your budget for the month.

It might seem boring or a waste of time but in the long run it is a hugely important money habit to develop and will help you have good finances. You can budget on paper (I made this pretty 11-page Budget Binder because some things I just need to write out) or using a budgeting app.

If you prefer to budget on paper, grab the Budget Binder here.

If you’d rather have an app safely store your info and make you graphs and analytics, the best free app is Personal Capital – check that out here.

How you budget matters less than the fact that you budget. The main thing is to know the flow of your money – what’s coming in and what’s going. Here are 5 best budgeting tools that will help you manage your money, even if you think you’re bad with money.

>> If you are new to investing, check out 5 smart investing tips for beginners

2. Don’t spend money on things you can’t afford in the present

Having a credit card gives us the luxury of buying things on credit. It’s so easy to lose track and overspend your payment limits.

The best thing is to avoid spending money on the things you already know you can’t afford. Sounds simple, but how do we do that?

Some people literally freeze their credit cards. Like put those credit cards in a freezer and only use cash/debit. You can switch to a cash-only system without freezing your credit cards too.

If you want to keep your credit card, have just one. Do you really need 3 credit cards? Probably not. Keep the one with the best rewards/no fees/lowest interest rate and cancel the others.

If your credit card company automatically increases your credit limit, give them a call and request that to stop. Years ago my credit card company over time kept increasing my limit. I didn’t pay close attention back then, until I read a popular financial book that made me look into it.

They had increased my credit limit to $13,000!!!  Almost nobody needs that high of a limit on their credit card.

If your credit limit is high, it’s easier to think that you have that much more money to spend. But you don’t. Figure out a reasonable limit for what you can safely pay off. Tell your credit card company no automatic limits and keep it to the amount YOU set, not your credit card company.

Also check out robo-advisors vs financial advisors – which is better for investing your money?

3. Live below your paycheck 

Whether you are working for an employer or are an entrepreneur, this good financial habit is super important if you want to shift the needle from bad to good finances.

For 6 tips on how to spend less money even during hard financial times, read this.

It’s so easy to spend all our monthly earnings at the beginning of the month. This leaves us with huge pressure to spend the rest of the days finding ways to cut down on our necessities.

If you have $2000 net income monthly, try living on $1500. If you are not already, start the good financial habit of putting that extra money aside in an emergency fund. Similar if you have a net income of $4000, save money right away by paying yourself first.

If your income is just too low that it feels impossible to live below your paycheck, you might want to look at increasing your income. You can do a lot with saving, living frugally, and being mindful of your money, but in some cases it’s not a spending problem, it’s an income problem.

To increase your income, here are 8 unique ways to make $1000 a month extra.

4. Know your wants versus your needs

Sometimes we buy things just because we want them. Those are impulse buys, and buying without much thought happens to all of us. Or is something all of us do.

Making the change here between a bad money habit and a good money habit takes a pause. Instead of wanting something…then buying it. Fast, like that.

Pause.

Slow down.

Feel the urge to buy something.

But then stop for a moment. The pause makes all the difference.

Before making the purchase, ask yourself this question:

‘Is this a want or a need?’

This will help stop you from making unnecessary purchases if you really can’t afford them.

A coat to keep you warm in the winter is a need. A third coat in a new color that would look great with the new sweater and boots you bought is a want.

Here are 7 financial lessons you should have been taught (but probably weren’t)

5. Diversify your income

Financially successful people often have multiple streams of income. This can mean a side hustle, second job, home business, dividend stocks, or a rental property.

There is financial safety in not relying on only one income source.

If you’re looking for flexible work you can do from home, check out these 10 work-from-home companies hiring now.

And this is a comprehensive guide on 20 stay-at-home mom jobs.

Those two posts will give you lots of ideas on ways to make extra money. There are side hustles that you can do if you can dedicate 20 extra hours a week, or even only two extra hours a week.

The bottom line on what it takes to have good finances

Money is much more than just a piece of a paper, it’s a kind of energy which motivates us to do things. Follow the flow of money and only use the money that has come in.

Minimize your expenses and grow your income so that you can live within your total income.

I hope these tips help you save more money and develop good financial habits. Share in the comments what good money habits you have (or are trying to start!)

Check out these 15 best budgeting books you NEED to read now! Have you read any of them?

If you are in debt up to your eyeballs, read this for help

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5 important money habits you need to have good finances

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6 thoughts on “5 Important Money Habits You need to Have Good Finances”

  1. Hi Suchot – these are all great tips – the biggest one for us has always been to live below our means. We’ve always lived comfortably but frugally – choosing to put any extra cash into our mortgage payments. In paying extra on the mortgage regularly we paid it off many, many years ealier than anticipated and once that huge debt is off your shoulders, you can live on a small income very comfortably – and choose to retire early (as I did). The options are endless if you are willing to be sensible with your finances – splurging or saving in the “now” has consequences long into the future.

    1. That’s so great Leanne – sounds like you have good finances down! We actually just paid off our mortgage and I have a big post coming out about that next week! I like how you put that: “comfortably but frugally” – that’s us too. I don’t at all feel deprived, but there are things other people have that are typical to own that we don’t have (b/c it just doesn’t mean anything to us). Have a great weekend!

  2. Diversifying income and saving more than spending is the smartest way to do more even in these times.Visiting from pitstop

    1. Yes! It gives me a lot of peace of mind to have multiple sources of income, especially since some have gone down due to the pandemic.

  3. CONGRATULATIONS: Our Julie, has chosen your post to be featured in our next Blogger’s Pit Stop.
    Kathleen

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