Good money habits are hard to come by for many people. While some people appear to be born with a “knack” for saving and spending wisely, it is something others struggle with–significantly. The younger you are when you begin to develop better money habits, the easier your financial life will be.
However, it turns out that you CAN teach old dogs new tricks. Even if you’ve struggled to manage money your entire life you can begin today to develop those better money habits that will carry you into the future whether you’re saving for college for your kids or saving for retirement for yourself.
Table of Contents
- 1 Give Cheerfully
- 2 Understand Needs Vs. Wants
- 3 Don’t Work for Wages Below What Your Skills Demand
- 4 Eliminate Debt
- 5 Credit Cards are Not Cash. Use Them to Your Advantage.
- 6 Don’t Anchor Yourself to Third-Party Assistance
- 7 Save for Emergencies and Milestones. But Don’t Over-Save.
- 8 Invest a Portion of Your Income Over Time
The idea of giving cheerfully for families that can barely make ends meet may seem ludicrous. However, if you start by creating a habit of giving small when you have very little, imagine how much you can give to your church and other positive causes once you’ve eliminated debt and are experiencing greater abundance in your life!
It doesn’t matter if you can’t match what Warren Buffett gives to charity. Rest in what you’re able to give from the kindness of your heart.
It’s also important to remember that cheerful giving allows you to focus–if only for a moment–on others who have less than you. This allows you to approach life, debt, and spending with a sense of gratitude for the things you DO have rather than focusing your mental and financial energy on the things you do not.
Understand Needs Vs. Wants
This is a hard one for people who live in a consumer-driven world. It is also an important one to understand. There are certain things in life you need.
- Personal needs – This includes things like food, clothing, and shelter.
- Family needs – When you have a family, there are other needs to consider, such as healthcare, education, nurturing, and love.
Everything else is a want. While wants are good to have–and often drive our desire to manage our finances more wisely–they aren’t essential to our existence or happiness.
Don’t Work for Wages Below What Your Skills Demand
That doesn’t mean you should quit your job out of the blue because it’s not paying you what you’re worth. It does mean that if you’re not getting a salary or hourly wage that’s worthy of your skills, now is the time to begin seeking new employment that will pay you a wage your skills demand. You can also consider starting a side hustle that could become a full-fledge
Debt quickly becomes your own personal albatross, weighing you down and preventing you from living a life of abundance. Think of how much more money you would have without paying interest on your debts. How much money would you save if you could pay cash for big-ticket items like your home, vehicles, and even college educations for your children?
Credit Cards are Not Cash. Use Them to Your Advantage.
Credit card rewards are tempting incentives for many people. And they can be real boons when used to your advantage. The key is to pay off the total balance every month so that you aren’t paying interest on your credit cards and to keep your debts at or very near zero.
Then enjoy the rewards that appeal to you most. Whether you are using airline miles, cashback rewards, or hotel vouchers, enjoy them knowing you’re not paying more than they are worth.
Don’t Anchor Yourself to Third-Party Assistance
Whether third-party assistance comes from the government or your parents, don’t allow it to become an anchor that holds you back from advancing your life. If you are otherwise able to support yourself, assistance is designed to be a temporary solution and not a permanent fix.
Moving into your parents’ home after college can be an acceptable solution if you are using that time to save money to purchase your own home. But you need to continue making headway so that living in your parents’ home doesn’t become a crutch that ultimately prevents you from achieving your original goal.
Save for Emergencies and Milestones. But Don’t Over-Save.
Dave Ramsey offers excellent advice on the topic of saving money with purpose. Ramsey suggests saving $1,000 first and then working to pay off your debts so that you can focus on other, larger saving needs, like those listed below.
- Retirement – One of the more important saving goals for the average person is retirement. No matter how young or old you are, it is important to make your retirement a priority without making it the sole focus of your saving effort.
- College – If you have kids, the odds are good that college tuition needs are in your future. Saving early can help you give your children one of the best gifts parents have to offer–a solid foundation in life unburdened by debt.
- Weddings – CNBC reports that the average cost of a wedding in the United States in 2019 was $33,900. That is the average cost, meaning some weddings cost much more. Be prepared (especially if you have a daughter or two like we do).
Once you’ve paid off all your debts, Ramsey suggests save up enough to cover between three and six months’ worth of all your living expenses. You’ll want to adjust that to work with your own comfort levels.
But the greater your savings, the more of life’s little emergencies you can be prepared to tackle. Whether it is the next pandemic or needing time off from work to plan for or recover from a child’s wedding, fly across the country to meet your new grandchild, or manage the daily costs of a prolonged illness; you’ll be prepared.
Don’t over-save, though. You don’t want to spend all your time, energy, and money saving for a future that isn’t guaranteed. You do need to live a little in the process.
Invest a Portion of Your Income Over Time
According to Dave Ramsey, saving money for retirement must be a priority. Whether you’re a successful entrepreneur today or you’re trying to get on your feet, you need to set aside as much as possible toward your retirement goals.
It is easier to do once you have your debts paid off. Then you can devote 15 percent of your income to tax-favored retirement plans, such as the following.
- Roth IRA – A Roth IRA is a retirement account that allows you to invest in a variety of things, such as stocks, mutual funds, real estate, and other types of investments today to help provide income for you during your retirement.
- 401(k) – Usually, an employer-sponsored plan that allows you to invest a portion of your pre-tax income toward your retirement. Some employers will match all or a portion of your investment.
You do not need to make vows of poverty and denial or track down all the best side hustles in life to enjoy greater financial rewards. Better money habits may take a little time and effort to begin. Once you make them habits, however, they become as natural as breathing and can set you on a path toward financial freedom for yourself and your family.