Financial wellness is the prerequisite to leading an independent and comfortable daily life.
Financial wellness begins with good financial habits.
It helps you develop a healthy relationship with money, keeps you engaged and motivated to earn, save, and invest, and leads to quality improvements in your daily life.
Here are some time-tested sound financial habits you should cultivate.
Be diligent with bill payments
Paying your bills on time will eliminate penalty charges, reduce your debt burden, protect your credit score, and keep you in better control of your monthly finances.
The simplest way to abide by this good practice is to set up your bill payments on auto pay. In relation to this, you may use an online calendar or phone app to create reminders for timely bill payments.
You may also sign up with your service providers to receive bills and bill reminders on email. If reminders don’t work for you and you don’t want to use the auto pay feature because you have an irregular income, you may consider paying your bills in advance.
When you have surplus funds, just prepay the bills for a few months ahead of time and avoid expensive late fees.
Check accounts frequently
Many people lose control over their monthly budget resulting in daily life difficulties simply because they have no idea how much money is available in their checking and savings accounts.
It’s best to develop the habit of checking your bank accounts often (preferably every day).
This will ensure that you are always aware of the exact amount of money available to you at any given point of time.
You will be able to prevent an unintended overdrawing from your accounts. If some error or fraud has occurred, you will be able to learn about it quickly. You can use online or phone banking apps to keep a track of your accounts.
Embrace simple ways to save money
The easiest way to inculcate the habit of saving every month is to automate your savings by setting aside a percentage from every paycheck. Credit unions and banks will usually facilitate automatic monthly withdrawals from your checking account to your savings account.
Some employers may have an arrangement to automatically deposit a predetermined percentage of your monthly pay directly into a savings account.
Avoid indulging in emotional spending, such as buying yourself an expensive drink or engaging in luxury shopping, when you are very happy or unhappy.
Redirect these emotions toward positive behaviors that don’t involve spending money. Practice delayed gratification as often as possible.
Follow your needs and not trends. For example, never buy the latest or highest-priced models of cars or new gadgets. Wait for the prices to rationalize.
Be proactive about debt
Expensive personal loans, auto loans, and high-interest credit card loans can quickly deplete your cash reserves and make it increasingly hard to sustain your daily life expenses.
If you make it a habit to pay off your debts proactively as soon as possible, it will save you substantially in terms of interest costs.
Consider using the avalanche strategy to pay down remainder debts. This strategy involves making the minimum debt repayment on each debt account, and using all remaining funds to repay maximum on the account with the most expensive debt.
Talk to creditors to reset more realistic goals and deadlines to pay off the debts, and explore the option of debt consolidation for a more cost-effective repayment plan.