Four Ways to Help You Establish Healthy Financial Habits
Financial planning can be challenging and is often a hurdle for many people because we are creatures of habit and finances are personal. Compare your personal finances to making that commitment to live healthier by making smart food choices and working out regularly. If you want to be successful, you must establish a personalized plan and be willing to change your current habits. One of the main reasons we prevent ourselves from working out 3-4 times per week or saving more and spending less is because we are not willing to change our habits. Many of us genuinely try, but we give up when things get too complicated.
Complexity is the enemy of progress, especially when you need to address both short and long-term financial goals, like paying off debt while saving for retirement. Here are some tips to help you establish healthy financial habits:
Set your money goals. do you want to begin paying off credit card debt, start saving for your child's college education or book a trip this year by only using cash? Whatever your financial goals may be, write them down and include what you need to do to achieve them. Planning for your short- and long-term financial goals is a process, and most cases, you must change a current habit to reach your goals.
Create a (simple) budget. Stick to it. Avoid making it more complex than it needs to be by creating a basic budget. The goal is to see where your money is coming from (your income), where it's going (your spending) and to identify areas in which you can improve (i.e., cancel those subscription services you no longer use - or need). Commit yourself to changing your current spending/savings habits to achieve your financial goals.
Creating a budget is a simple step to getting control of your money and financial situation, but sometimes it's the most difficult to implement. If you have concerns over certain areas of your budget and feel you need to trim back, consider talking with a financial counselor from our partners at GreenPath to help you make better informed decisions.
Pay yourself first. Every month, your first expense should be to pay yourself. If you're like most people, paying yourself is the last on your list. And it makes sense with the seemingly endless stream of expenses we are responsible for (mortgage, rent, groceries, car insurance, etc.). If you want to see your net worth steadily increase, you must pay yourself first. Make it easy by setting up an automatic deposit from your paycheck. Finding new ways to save will become more of a long-term commitment rather than a short-term challenge.
Put your money to work (for you). To address your short-term money needs while committing to your long-term goals, you will need to put the money you save to work. This can include setting up an emergency fund, so you have access to cash in times of need; contributing to a 401(k) to help plan for your retirement years; protecting yourself and your family by finding the best insurance policy for your situation; or opening a 529 college savings plan.
Remember to set goals, keep it simple and know there will likely be some hiccups along the way. The simple financial habits you establish today will help you stay on the course to lifelong financial success.
Not sure where to start? Our Rock Valley Investment Services team is here to help. For more information or to schedule a free virtual or in-person consultation, visit us online or call (815) 282-7436.
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