If you turn on the news, check social media or even turn on the radio, you will definitely hear someone talking about an upcoming recession. 2020 is fast-approaching, and apparently so is another recession, which means it’s time to focus on mastering financial habits that will get you through the inevitable rainy days ahead. There are so many important habits to build up slowly over time but I’m highlighting the 5 that I believe are simple to start and give you a big bang for your buck!
Financial Habit # 1: Automate your savings weekly
Behavioral scientist and co-founder of Common Cents Lab, Wendy De La Rosa, says that in a study that compared spending between two groups, one group saw their income monthly and the others saw their income weekly. People who saw their income on a weekly basis were able to budget better throughout the month. The amount of money the two groups had was the same but the environmental cues were different! In order to have a better chance of success with saving you have to set it up so that it happens weekly and automatically. That way you don’t even have to think about it. Even if it’s just $20 a week, trust me on this – it makes a huge difference in your financial situation over the course of a year or 2! You can go from having no money set aside for an emergency, to all of a sudden having about $2,000 set aside. The key though is it to bridge the gap between your intention to save the money and your actions. Whenever it comes to saving money in an interest-bearing account, you want to make sure that the account is a high yield saving account to ensure that you’re getting a competitive return on investment each year that you save!
Financial Habit # 2: Review your account statements monthly
After college, I had 5 different credit cards that I was using simultaneously throughout the month. Whenever my statement came to me via email, I’d open it up and check the balance due. I always made sure my bill was paid on time, which is a great financial habit to build. But the problem was that I never bothered to scroll further down and look at the individual purchases listed on my statement to see if they were all accurate. It wasn’t until I read a personal finance book that I took the advice of going over my statements with a highlighter. I would highlight anything unfamiliar or unusual so that I could follow up on it. Then in a different color, I would highlight any purchases that I didn’t remember or that I regretted making. This was one of the reasons why I finally decided to put myself on a strict budget! Going over my financial statements helped me see the patterns in my spending and identify the areas where I really needed to cut back and be more reasonable. Now, I look over my statements once a month to make sure that my spending choices are in line with my spending goals!
Financial Habit # 3: Monitor Your Credit Score & Credit Report Every few months
Your credit score is the number lenders will use to determine whether or not they’ll lend you money for your biggest purchases in life, like a college degree, a car or a house! If your score is great, that tells them that it’s very likely you will pay them back on time and you’ll likely get very good rates when you borrow money. But there are way too many people who do not know their credit score or what details are listed on their credit report. Keeping an eye and monitoring your credit report and score on a regular basis is the only way to catch errors or fraud that directly affects your records and negatively reflects on you. Identity theft is on the rise due to the fast developments in technology in the past 10 years, so this is more important now than ever before! Try to take a look at the credit file in your name with each of the 3 credit bureaus – Equifax, Experian, and TransUnion – at least once per year. More and more people check their credit score through a credit card provider online or with an app. This can be simple and accessible, but you just have to be sure to put it on your calendar!
Financial Habit # 4: Delay non-emergency and major purchases
If it’s about that time to buy a new bed or washer and dryer, give yourself time to think it through! Try waiting a few days before making the actual purchase. For example, if you see a bed that you really like, but it’s just not in your budget. The thought of putting it on a credit card and paying it off slowly will surely tempt you! If you’re in the moment and feeling all excited about sleeping in that new bed, you’re going to get lost in your emotions and make a few clicks without thinking too much. But if you wait a few days, you might find a better deal or change your mind about overspending. Give yourself the time that any normal human needs for the logic to return! The best financial decisions are driven by logic and reason, not by your emotions and feelings!
Financial Habit # 5: Consume at least 2 financial books, blogs or podcasts for the year
Investing in yourself and your own knowledge is one of the best investments you can make. There are thousands of financial books that have helped people make better financial and life choices, get yourself one or two! And if you’re not a big reader, or you drive very often and can’t fix your eyes on a book for too long then you might opt for audio-books or podcasts! Technology allows us to access blogs, podcasts, and audiobooks online for free or at a very low cost. There has never been a time where there was more online content available for free! So, this is the time to take advantage of that and learn from other people’s expertise and experiences.