One of the most important things you can do to start feeling more in control of your money is to work to cultivate healthy financial habits.
Having better routines in place can keep us more aware of our finances so that we can be more intentional about what we earn, spend, and save.
In this post, I’ll share with you 9 healthy financial habits that will have a major impact on your life.
Nine is a big number though, so if you’re new to the world of personal finance, start by choosing just one or two to focus on. Bookmark this post so you can return to it later as you are ready to start layering on more habits.
Habit #1: Create a budget
Having a budget is the single best way to get control of your finances.
How does that Benjamin Franklin quote go?
“Failure to plan is planning to fail.”
A budget is a plan for your money. Without a budget, it’s all too easy to log into our bank account only to wonder where in the world the money went.
I’m a huge fan of budgets, but I will admit that I haven’t always used them. When I compare I’m having a budget to not having one, the difference is so clear though. When we have a budget, we are able to get so much further in reaching our financial goals. I also feel better about myself, because I don’t have that sinking feeling that things might be spiraling out of control without me even being aware of it.
So get in the habit of regularly creating a budget. And if you need help getting started, check out my post on creating your first household budget.
Habit #2: Track your expenses
A budget is a plan for your money, but just creating that plan is not enough. Another powerful healthy financial habit involves actually tracking how your spending is going.
How or how often you track your expenses is up to you. The most important thing is to find a system that works for you and is sustainable.
My husband and I use a private chat in a messaging app. We log any money we’ve spent in that chat as we spend it. Then every couple of days, I transfer that information into our budget spreadsheet.
You may choose to use a notebook, an app (like Mint or You Need a Budget), or a spreadsheet. Just be sure you log your expenses regularly enough that it doesn’t become a big daunting task.
Habit #3: Set financial goals
You may be under the impression that getting good with your money is all about learning to be frugal and restrictive. Developing healthy financial habits would then be all about getting good at denying yourself certain things.
But that’s really a distorted picture of personal finance.
Yes, we do need to keep a watchful eye on our spending… but it’s not just to punish ourselves. It’s so that we can reach the goals that we have for our lives.
So get clear on what those goals are. What do you want to accomplish with your money this month? This year? In the next five years?
This is the time to dream big. Are you hoping to move into a new house? To become debt free? To reach a milestone on your path to retirement? Or to take that vacation you always dreamed of?
Set aside time at least yearly to reflect on your current situation and to accept goals for the future.
Habit #4: Check in regularly with your spouse or partner
If you are married or share finances with a partner, it’s important to make sure you and your partner are on the same page.
When you are just starting to lay the foundation for good financial habits, you may need to have a longer conversation about your goals, your spending, and any changes you may need to make. This conversation may be tricky and will likely involve a large amount of compromise.
Once you have that clarity, it will still be vital to stay in communication about your finances. Consider starting weekly meetings about your budget and your spending, or at the very least check in at the end of the month to reflect on the previous month and to plan for the next.
Habit #5: Spend with intention
Personal finance can’t just be about saving money and cutting back. It also needs to be about spending.
But not reckless spending. Spending with intention.
So if getting that daily cup of coffee is important to you, do it. But don’t just do it out of habit.
If you like to eat out or get takeout, build that into your budget and be purposeful about it. Try to avoid that just being the default for those days when you’re too tired to cook—because goodness knows that would be pretty much every day if we let it.
Your spending should reflect your values in an ideal world, whether you value family, friends, restfulness, excitement, learning, or anything else.
So next time you review your spending, check to see how well your values are reflected.
Habit #5: Maintain an emergency fund
Another healthy money habit is to maintain an emergency fund to protect your finances against the unexpected. An emergency fund can prevent you from getting into debt from things like nature car repairs, health problems, or job loss.
So get in the habit of setting aside money regularly to build up your emergency fund.
If you already have a healthy emergency fund, great! But if and when you need to dip into it, you want to start building it back up again as soon as possible.
If you want to know where to keep your emergency fund, here’s an article I wrote recently on the topic.
Habit #6: Follow a debt payoff plan
If you have debt, whether it be credit card debt, student loans, or a mortgage, create a plan for paying off that debt. For high-interest debt, the sooner you can pay it off, the better. You may choose to slow pay some debt, like a low-interest mortgage or a student loan that you are hoping to get forgiven. But even in these cases, you’ll benefit from having a plan for your debt repayment.
To pay off your debt, there are a number of methods you can choose:
- the debt snowball method – throwing all extra money at the smallest debt first, then once it’s rolling that debt’s minimum payment into the next smallest debt, and so on
- the debt avalanche method – similar to the debt snowball method, but working from highest interest to lowest
- some combination of the two, or some other order that has more motivational impact for you
Making debt payoff a habit instead of just a “good thing to do if you can” will help ensure you actually make solid progress.
Habit #7: Send money to your financial goals regularly
There are two natural times to think about putting money aside toward your financial goals. The first is when you are creating your budget and projecting how much you can devote to each goal. The second time is when you are closing out your budget and seeing how much you have leftover.
But I also believe that real progress in achieving these goals comes from being even more regular about contributing to goals.
For some, that may mean setting up an auto-transfer so that money gets sent to a different savings or investment account automatically, before you are even tempted to use the money for something else.
For others, it may mean creating a more regular habit of doing manual transfers. I personally have started participating in “Transfer Tuesday,” started by Mary of Pennies Not Perfection. Every Tuesday, we send something to our financial goals, whether that be $1000 or $10. Every little bit adds up when done regularly.
Habit #8: Track your progress
The more daunting your financial goals are, the more it’s important to stay motivated so that you don’t give up before you reach them. Whether you’re trying to climb yourself out of a lot of debt, trying to save up for a major life event, or trying to retire early, the delayed gratification of these goals can be tricky to deal with.
Because of that, tracking your progress toward these goals can be an essential habit to develop.
For our family, I have a tab on my budget spreadsheet where we track progress. I also make regular Instagram posts noting the amounts we transfer each week toward our goals.
Other ways to track your progress include coloring sheets, a plain and simple list, or even documenting your progress on YouTube or a blog
So find a method that’s inspiring to you, then record your progress regularly. The visual reminder of the progress you are making can be so helpful.
Habit #9: Keep reading about personal finance
Another way to continue moving forward in your financial journey is to continue to learn. Not only does this keep personal finance top of mind, but it also helps you refine your process as you go.
Here are some of the resources I have found the most powerful:
Books
- The Simple Path to Wealth, by J.L. Collins
- I Will Teach You to Be Rich, by Ramit Sethi
- Profit First, by Mike Michalowicz (Read my discussion of this book here.)
- Atomic Habits, by James Clear (not about personal finance, but completely relevant to the discussion of developing better habits around money)
YouTube Channels
Podcasts
- Inspired Budget, with Allison Baggerty
- Choose FI, with Brad and Jonathan
- Personal Finance Club, by Jeremy Schneider
Final Thoughts
The nine healthy financial habits outlined above are all wonderful habits to have. But nine is a lot. If you are just getting started organizing your finances, don’t try to do them all.
Consider which habits would be the most important to implement, and which would be the easiest.
If you’re feeling motivated, start with a couple of habits that you think would have the most impact. But if all of this is super daunting, just focus on developing the easiest habit first. You can add in more later.
This post may contain an affiliate link or a referral link. For more information, please see my disclosure here.
This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.