Good Budget Habits
While financial habits and priorities are different for everyone, there are some basics that everyone should follow, or at least understand, to have a healthy relationship with their money.
Track your spending
As much as it may hurt to track your morning tea, your lunch, your sneaky 3PM pick-me-up and drinks after work with friends, that’s part of what makes it good and helpful! Observation of a habit can actually help you change it. Regardless of how "good" or "bad" you are with your money, we all have spending habits that we could probably change.
There are a number of apps and software out there that could help you do this, like Mint, Pocketbook and Good Budget and even some that are aimed specifically at helping build financial literacy and creating good financial habits, like You Need a Budget.
Stop thinking so much
Automate your finances, as much as you can. If you don’t have to think about it, you’ll probably forget that you have the chance to change it - to not put 20% of your pay into savings, to not send $100 into investments, to not pay your credit card minimum.
Most banking institutions and credit card providers allow you to set up automatic, scheduled payments, on varying intervals including fortnightly and monthly - so take advantage of that and line up your automatic payments with your pay period. You may want to choose the day after you get your pay, or another "safe" day close to when you get paid and you know the funds will be in your account.
Automation has other benefits, as well: namely, you stop thinking so much about your finances because it’s on auto-pilot, and you don’t have to think about it. Financial stress is one of the major stresses we can have, and automation removes a bit of worry from the financial side of your life, which in turn gives you a bit more time to relax and enjoy your day.
Come up with specific goals
We generally prefer instant gratification, as a whole. We want to be able to see the impact of the thing we just did - it’s one of the reasons why creating long-term habits - going to the gym, saving money, eating healthier - can be so difficult. We aren’t seeing immediate effects, and sometimes we won’t benefit from our choices until years later.
If you have a specific goal you’re working towards, and further break it down into smaller goals that are a bit more immediate, it will be easier to remind yourself what you’re saving that money for. This is also where choosing the right budgeting method for you is important, as different budgeting styles work better for different people, and you may need to try a few out before you land on the right solution to work towards the goals you’re setting.
As well as setting savings (and, conversely, spending) goal, it’s worth setting a revenue goal - how much money you want to be earning in a month in a year, three years, five years. Be realistic, yet challenging, and then list out what you’ll need to do to accomplish that goal. What you earn and what you save are two sides of the same coin and both will help your financial health.
Plan for larger expenses, pocket unexpected cash
Do you know you’ll want to buy a new phone this year? Are you someone who enjoys buying gifts for friends and family on their birthdays, holidays? How frequently do you usually go to the doctors? How often does your car (if you have one) need service?
On the flipside of making sure that you plan for bigger expenses, try not to spend unexpected cash - including bonuses or raises, and tax refunds.
All of these expenses can catch you unawares if you just base your budget off of a "standard" month. When you build your budget, then, you’ll want to take into account less frequent, but sometimes more expensive things.
Take a look back at the past year and get an idea of how much you spent on things like that - or what unexpected cash you received. Some expenses don’t happen frequently but can be expensive when they do. It may also be worth taking a look at tax refunds, bonuses or raises you received so that you can take that into account with your goal setting as well, as that extra money could (and should probably) go straight to savings.
If you know you spend $1,000 on holiday presents, it’s often easier on your wallet if you put aside $90 or $100 a month from the beginning of the year, and makes your budget more reflective of how you actually spend your money throughout the year!
Tracking your spending, using that to set a budget, setting financial goals, automating what you can to reach your goals, and making sure to take into account larger annual expenses... you’re off and running on the path to solid financial habits!