5 Tips For Better Financial Health
Every New Year brings the opportunity for fresh starts and better habits. While many of us are looking for ways to get our bodies in better shape, it would be wise to also evaluate one’s financial health at the beginning of the year and make a plan to get financially fit.
Just like counting calories can keep meals and snacking in check, documenting bills and purchases can really help curb spending. Here are 5 easy tips to get you started toward better financial health.
1.Create a budget.
By writing down your net income and all of your monthly expenses you can begin to understand where your money needs to go. It’s also a good idea to organize your expenses by date so you can see when payments are due in relation to your paydays. Understanding when money comes and goes from your account can help you avoid overdraft fees.
2.Track all spending.
Keep all of your receipts for at least a month and then sort them into categories – housing, utilities, food, entertainment, transportation, savings, credit cards, student loans, etc. Once you see where your money is going, it will be easier to determine the areas where cut backs can be made.
3.Separate wants from needs.
If your stack of receipts includes lots of lunches out and morning coffees, you may see an opportunity to change some habits to improve your financial health. Make sure that all of your financial needs are met first, including monthly savings, before indulging in too many wants like expensive beverages.
4.Pay bills and save automatically.
The extra time needed to keep track of your budget can be offset by automating your bill payments. It is a money saver as well, cutting back on the need for checks, envelopes and stamps. An added bonus is the boost to your credit score when bills are paid on time. Treat savings like a bill and auto transfer a set amount each paycheck into your savings account before you have an opportunity to spend it on frivolous items.
Starving yourself on a diet never works and often results in binge over eating. The same can be true with budgeting. Make sure you build in small rewards when you reach your goals so you don’t feel deprived and overcompensate with a shopping spree.
The best way to create change and stick to it is self-awareness. A working knowledge of monthly expenses and attention to your discretionary spending can create great money habits that last a lifetime.