According to author and personal development trainer Brian Tracy, research suggests it could take just 21 days of repeating an action to turn it into a habit. This could be great news if you want to switch some bad financial habits into good ones.
With this in mind, read on to discover 10 good financial practices that you could start turning into a habit today.
1. Work to a budget
The cornerstone of good money habits, creating a budget could help you manage your money successfully and help avoid any unexpected – and unwanted – financial mishaps.
You’ll also be more relaxed, as you’ll know you can meet your liabilities without running the risk of accidentally overspending.
2. Have an emergency fund
Having between three to six months’ worth of expenditure in an easily accessible account is key to good financial practice. As Covid has taught us, you never know what tomorrow holds, and having enough money to keep yourself financially afloat if you can’t work is critical.
In addition, an emergency fund means there is money available to deal with the unexpected, such as the boiler needing to be replaced or the car needing expensive work done. This could prevent you having to put a large expense on a credit card that then charges high levels of interest.
3. Check your finances regularly
Setting up a time every one or two weeks to look at your finances carefully will make it a habit very quickly. This means it will be easier to keep on top of your income and outgoings, and it won’t become an all-day job you dread doing once a year.
It also means you’ll be able to catch any anomalies with your accounts more quickly, such as if you’ve been scammed and hadn’t realised.
4. Start or review a retirement plan
Whether you’re starting a new pension or reviewing an existing one, getting into the habit of knowing what your pension is doing is an excellent idea.
It will help you understand whether the income it’s likely to provide will be enough to support your desired lifestyle in retirement. If it won’t, speak with a financial planner, who could help you grow your pension to the level it needs to be.
5. Start the 30-day rule
This is a great habit to eliminate purchases you only feel bad about later. If you see an item you like, instead of giving in to impulse buying, tell yourself that you’ll buy it if you still want it in 30 days.
Make sure you take the time to think about why you want it during the period. If at the end of it you do still want to buy it, you’re more likely to feel good about the purchase and not suffer from buyer’s remorse.
6. Keep up to date with personal finance
Reading news articles about personal finance and money could help alert you to things you need to know, as well as financial opportunities you may want to take.
Another good idea is to read at least one finance book a year. Doing this could provide a deeper understanding of how to make your money work smarter for you and give insights about investing you may find helpful.
7. Pay more than the minimum on your credit cards
If you are not clearing your credit card at the end of every month, you will typically pay interest – and potentially a lot. Instead, if you can get into the habit of clearing the amount at the end of each month, you will normally not incur any interest.
8. Set up an automatic transfer into a savings account
While the idea of putting money aside into savings is a good one, sometimes we forget to move it or spend it on other things. By setting up an automatic transfer into a savings account, ideally, just after payday, you won’t have to remember to do it and the temptation to spend it could be reduced.
9. Consider investing your money
Investing may expose your money to greater long-term growth potential, which may help inflation-proof your cash.
The graph below shows the 10-year performance of MSCI World index, one of the leading stocks and shares indexes that shows the performance of a basket of companies across 23 nations.
As you can see, despite downturns along the way, it has risen significantly since 2011.
Please remember, while investing may expose your money to greater growth potential, it should not be entered into lightly and is typically a long-term venture. You may receive less than you initially invested.
10. Appoint a financial planner
A financial professional can help you create a wealth strategy that could help you meet your short-and long-term financial goals in the most tax-efficient way. More than this, they provide peace of mind that your financial strategy is right for you, and can help you make decisions you’re likely to thank yourself for in years to come.
Get in touch
If you would like to discuss how you could meet your financial goals or would like to discuss your wealth more generally, please contact us at [email protected], we’ll be happy to help.
This article is for information only. Please do not act based on anything you might read in this article.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.