Working on your finances can be a long process, but taking it one step at a time and developing better money habits can help you get ahold of your finances and start building a better future for yourself.
If you struggle with setting money aside for the future or feel like you’re living paycheck to paycheck, it could be a result of bad money habits. Lucky for you, we’ve gathered some candid advice from Mint Financial Coaches on breaking bad money habits and ushering in good ones in the new year, compiling it all into a list of 23 better money habits to start doing in 2022. Spend less, save more, and budget on!
What Are Better Money Habits?
Better money habits are practical lifestyle changes and practices to achieve your financial goals and have a better relationship with money. Developing good money habits can help you live more comfortably, stress less about your finances, and be prepared for the future.
Creating better money habits starts by getting rid of your bad money habits, such as impulse buying, and swapping it for a good money habit, such as only purchasing in order to satisfy a real need.
23 Better Money Habits to Start According to Experts
If you don’t know how to start developing better money habits, follow our Mint Financial Coaches provided tips for how to start implementing good money habits in your day-to-day life. You’ll be surprised to learn that you can ditch your coffee shop trips and invest in your coffee-making skills to save over $900 a year.
1. Build Your Credit Score
Having a good credit score is not only important for qualifying for better interest rates when getting a loan — it also shows you have good money habits. Working on building and increasing your credit score can qualify you for lower interest rates on your credit card and finance charges and get you better rates on insurance
You can still use your credit card if you use it wisely. Making sure to pay your bills in full on time, and billing fixed expenses to your credit card can help you build your credit score and get rewards.
2. Reduce Credit Card Debt
According to Mint Financial Coach Joe Dike, CPA/PFS, CFP, a good money habit reduces your debt or yields a return. Together with building your credit score, lowering your credit card debt will also help lower interest fees paid each month.
Credit card debt can easily get out of hand when you’re using your credit card for most purchases, especially considering when you add incurred interest and finance charges.
3. Prioritize Your Student Loan Repayment
If you have student loans and you want to start building better money habits in the new year, it can be a good idea to start focusing on repaying those loans to avoid paying large amounts of interest and have peace of mind as an added bonus.
Having student loans is nothing to be ashamed of, but take only what’s necessary. Mint Financial Coach Jared Smout, CPA, mentioned that one of his biggest financial mistakes was taking out more student loans than he needed. “It was easy to justify because I had a young family I needed to take care of,” he said, “but we could have found more ways to sacrifice instead of having an extra debt load.”
4. Keep Track of Your Net Worth
Your net worth is everything you own minus your debts. Staying updated with it, and understanding what it means can help you keep track of your progress and spending, and learn how to be better with money. Routinely looking at your liabilities (your debts) and making sure they don’t exceed your assets (money in your checking account, 401(k) and investments, owned cars, etc.) is a good money habit to start if you want to become more financially savvy.
“Good money habits tend to have a positive effect on net worth by reducing liabilities or increasing the value of assets.” — Joe Dike, CPA/PFS, CFP, Mint Financial Coach
5. Review — And Cut Back On — Your Regular Expenses
Many of us might be scared to look at our expenses at the end of the month. But building a habit of reviewing your expenses can help you cut back on unnecessary spending and build savings.
Mint Financial Coach Om Mandhana, CFP, provided some tips on how to cut back on regular expenses:
- Coffee: Start drinking black coffee when visiting a coffee shop, since it tends to be cheaper. Or make your coffee at home and reduce the number of times you go out to buy coffee.
- Phone: Switch to a mobile virtual network operator (MVNO) or downsize your plan and data allowance.
- Fitness: Instead of spending money on gym memberships and personal trainers, consider free physical fitness activities, such as free online videos, running, walking, and hiking — or even cartwheeling. If you still feel the need to go to the gym, plan to spend no more than 2 percent of your income on a membership.
- Food: Eating at home and eating healthier can get you more bang for your buck. Consider meal prepping food at home and having packed lunches for the whole week.
6. Start a Savings Plan
If you want to start building better money habits, Mint Financial Coach Anthony Castella, CPA, stresses the importance of saving regularly. He mentions that it’s important to try to set aside an amount for savings from each paycheck. To make the process easier, Castella recommends having money automatically taken directly from your paycheck and directed to savings and investment accounts.
Now, if you already have a savings plan but want to increase it, Dike recommends systematic savings. In order to do that, he plans savings goals and establishes deadlines, then calculates the weekly or monthly amount needed to satisfy that goal and sets it on autopilot.
7. Allocate Time for Your Finances
Allocating time for your finances during the week will set you up for success when you’re trying to practice good money habits. Set time aside one day per week to look at your finances and figure out what needs to be improved.
Mint Financial Coach Ralph Schule, CPA, allocates time for his finances by using the bottom-up approach. In this approach, you take into account how much money is leftover every week after expenses and savings, and, except for emergencies, never spend more than the leftover amount.
8. Buy Only What You Need
If you find yourself spending money on unnecessary things, start a habit of taking some time to think before you buy and only buy what you need. Mint Financial Coach Karen Layfield, CPA, always remembers her mother’s advice before buying anything: “It’s not a bargain if you don’t need it.” With that said, do your research and ask yourself if it’s something you actually need, or if it’s something you want.
However, if it happens that you need to buy something, it can be a good idea to look for secondhand items. Keep in mind that you don’t have to go after the latest technology or clothes, and there are many secondhand options that can be as good for the environment as they can be for your wallet.
“In terms of spending on things, I was taught to ‘Use it up. Wear it out. Make it do or do without.’” — Jared Smout, CPA, Mint Financial Coach
9. Plan Your Retirement
Preparing for your future starts when you’re young. If your company offers a 401(k) plan, take advantage of it, especially if they match it. To start preparing for the future and develop better money habits, every bit of help is beneficial. A portion of your paycheck will be going toward this investment account — a retirement account that you can withdraw from in the future.
10. Learn From Your Financial Mistakes
When trying to build better money habits, you will likely make mistakes. But if you want to have a better relationship with money, it’s important to learn from your errors. Even Mint Financial Coaches have made mistakes in the past, and shared their learnings with us.
As an example, Mandhana learned his lesson after losing $5,000 while currency trading on margin. He now stopped margin investing and became a buy-and-hold investor, which has been serving him well.
11. Learn More About Money
One good money habit Dike has is to never stop learning. Learning about money can help you understand what you can do better and get you closer to becoming financially savvy. If you want to start learning more about money and how you can build better money habits, here’s how the Mint Financial Coaches keep themselves updated with the financial world:
- Browsing the Fidelity Investments website
- Reading Kiplinger’s Personal Finance magazine
- Listening to the Faith Driven Investor podcast
- Subscribing to Kitces.com and getAbstract.com
- Watching Ray Dalio’s videos on YouTube
“Knowledge applied, not just accumulated, can make you healthy and wealthy!” — Joe Dike, CPA/PFS, CFP, Mint Financial Coach
12. Start Budgeting
Budgeting is key for developing better money habits. To avoid spending money beyond your budget — which Mandhana considers a bad money habit — it’s important to set boundaries, such as having a spending limit for your groceries, and keep track of your finances.
There are many ways you can start budgeting your money, whether that’s through an app or trying out money-saving challenges, staying committed and finding what fits your lifestyle the best are the most important steps.
13. Use Coupons and Discounts
When it comes time to buy something, Mandhana suggests using discount coupons. Doing your research and finding what fits your budget is another good money habit to start. Mandhana adds a tip for grocery shopping: “Buy items only when in season with plenty available and on sale. If you have time and space, store and preserve products during off-season.”
“Buy items only when in season with plenty available and on sale. If you have time and space, store and preserve products during off season.” — Om Mandhana, CFP, Mint Financial Coach
14. Cut Down on Living Expenses
You can also develop better money habits at home. Evaluate your utility bills and find ways to save, such as conserving more water and energy, or negotiate medical bills if possible. Get into the habit of making a grocery shopping list, meal planning to avoid wasting food, and price checking to avoid overspending. And if you feel like you’re spending too much on entertainment, find free activities for the family and cut down on subscription services that are not often used.
15. Avoid Emotional Spending
“A bad money habit enables instant gratification and tends to satisfy temporary urges,” says Dike. Curb your emotional spending by avoiding going out when feeling stressed or sad, deleting shopping apps, and keeping your credit card at home. If you have the temptation to buy something, take a few days to think about it and assess your budget.
“Impulsive spending motivated by immediate gratification without regard to need or emergency is a bad money habit.” — Ralph Schule, CPA, Mint Financial Coach
16. Find Someone to Hold You Accountable
If you’re struggling with staying motivated to work toward your goals, find someone who can hold you accountable. That person could be a close friend who can give you some tough love or even a financial coach.
15. Avoid Emotional Spending
“A bad money habit enables instant gratification and tends to satisfy temporary urges,” says Dike. Curb your emotional spending by avoiding going out when feeling stressed or sad, deleting shopping apps, and keeping your credit card at home. If you have the temptation to buy something, take a few days to think about it and assess your budget.
17. Sign Up for a Budgeting App
If you struggle with budgeting, there are many budgeting tools available to help you keep track of your finances. Signing up for a budgeting app, such as the Mint app, can help you get closer to your financial goals and start building better money habits. Routinely updating your budget on an app will help you evaluate your expenses better and make you think twice before spending.
18. Create a Financial Goals List
If you’re more of a visual learner and motivated by achieving small goals, start a habit of creating a physical list of financial goals you want to achieve. This can help give you a clear understanding of what you need to be doing and plan how you can achieve your goals.
“Good money habits are the ones that are helpful to you in achieving your financial goals.” — Om Mandhana, CFP, Mint Financial Coach
19. Pay Yourself First
Developing better money habits doesn’t mean you can’t buy things you like anymore. With enough planning, you can still find ways to enjoy yourself while saving money. Smout says: “Pay yourself and your debts first before you pay for your wants. It’s OK to spend money on the things we like, but not at the expense of our future by not saving or trying to run from the past by not paying our debts.”
By evaluating your budget and saving money regularly, you are paying yourself so you can have a better future, enjoy things you like, and take care of loved ones
“It’s OK to spend money on the things we like, but not at the expense of our future by not saving or trying to run from the past by not paying our debts.” — Jared Smout, CPA, Mint Financial Coach
20. Reevaluate Your Role Models
If you find yourself trying to keep up with celebrity and other friends’ lifestyles that are not necessarily within your budget, it might be time to reevaluate your role models. Start a social media cleanse to avoid shopping temptations and surround yourself with people who will motivate you to start building better money habits
21. Be Smart About Investing
Investing can open the doors to financial freedom, but if done poorly, it can take a toll on your finances. Mandhana advises that you shouldn’t invest in anything until you fully understand it. Take time to study investing and evaluate your budget before making that commitment. Whether you want to invest long-term or in cryptocurrency, make sure you’re in good financial standing and understand what you’re doing.
22. Live Within Your Means
“Living within your means” spending less than the amount of money you bring in each month. ”Whenever possible, you should try to spend less than your income,” Castella says. “If it is not possible and money is tight, you should try to reduce non-essential spending so that you don’t take on too much debt.”
Avoiding speculative decision-making can also help you live within your means. Smout agrees, “We all need hope that things will get better, but the worst money habit is to live beyond your means — spending more than you make on the faulty thinking that things are already better. Never base your current decisions on desired future outcomes — wait until they have actually happened”
“Whenever possible, you should try to spend less than your income. If it is not possible and money is tight, you should try to reduce nonessential spending so that you don’t take on too much debt.” — Anthony Castella, CPA, Mint Financial Coach
23. Plan for Emergencies
Emergencies can happen at any time and place, so being prepared ahead of time will make sure not to put a strain on your finances. Add to your emergency fund on a regular basis and reserve a chunk of your paycheck each month for your savings. Mandhana advises to always have adequate life insurance to cover your living expenses for 10 years, kids’ education, your mortgage, and other loan balances.
Our experts understand that life can be complicated and unexpected — that’s why it’s a good habit to plan ahead for an emergency. Schule, for instance, suggests: “Try to forecast unexpected needs of relatives, such as parents and siblings. You might have to say no, but it feels a lot better to say yes.”
“As much as possible, try to forecast unexpected needs of relatives, such as parents and siblings. You might have to say no [to helping relatives], but it feels a lot better to say yes.” — Ralph Schule, CPA, Mint Financial Coach
The Bottom Line
The good thing is you have already overcome the hardest step of developing better money habits by finding out how you can start. Whether you start slow by applying only one of these tips, or decide to try out a couple, implementing these into your spending and saving routine can help you get used to budgeting and create a better future for yourself.
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