Financial Habits to Increase Your Financial Security

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financial habits, financial stress, financial freedom, financial security, retirement, credit cards, shopping, track spending

The following is a post by MPFJ staff writer, Toi Williams, who is a professional personal finance blogger of Fine Tuned Finances. She has backgrounds in personal finance, sales, and real estate.
All of us have habits that we have established when it comes to spending money.  Some of these habits can save us a considerable amount of money, while some others can result in us wasting more money than we realize.

By changing our wasteful spending habits and adopting some habits that help us control our expenses, we can increase our financial security and hold onto more of our wealth.

Here are some of the best financial habits to adopt for a secure financial future.

Limit Credit Card Spending To Emergencies

Many people get into financial trouble because they use their credit cards to pay for everything, and then only pay the minimum amount when the bill is due.  This allows them to build large balances that are subject to interest and fees, making the balance difficult to pay off.

In order to avoid this debt trap, limit your use of your credit card to true emergencies, such as repairs to your home that need to be made immediately, car repairs needed to keep your car running, or items that are needed quickly but can be paid off within one or two months.  Remember, every time you use your credit card but you do not pay in full by the due date, you could be paying interest on that purchase for months or years to come.

Comparison Shop Before You Buy

In many cases, the first price that you see for an item that you want is not the best price available in your area for that item.  By taking a few minutes of your time to search prices online before heading out to the stores, you may find that another retailer has the item for a lower price or currently has the item that you want listed as being on sale.  If you are looking for a large ticket item or something that you do not need to purchase right away, you may want to monitor the sales flyers for the retailers in your area to see when the item will be on sale and which retailer consistently has the lowest prices.

Document Your Spending

The best way to see where your money is going is to document the amounts that you are spending and what you are spending your money on.  Having a running total of the amount that you are spending each month will help you limit your spending to what you can afford and prevent you from getting too deeply into debt.  A list of your spending will also help you see where spending could be cut to save more money for the future.  There are a number of different computer programs and online tools that can help you track your spending, but many people are just fine using a notebook or checking account ledger for writing everything down.

Focus On The Debt With The Highest Interest Rate

If you are already facing more debt than you are comfortable with, make a plan for paying off those debts by focusing on the highest interest rate first.  The debt with the highest interest rate is costing you more per dollar, so you are paying more to borrow that balance from the lender.  Remember to pay at least the minimum amount for all of your other debt accounts and pay as much as you can towards the balance with the highest interest rate.  Once that balance has been eliminated, focus on the debt with the next highest interest rate and so on until all of your debts have been paid off.

Pay Your Bills As Soon As They Arrive

Paying your bills late is one of the worst things you can do when it comes to finances because of the number of negative consequences that can occur from the action.  Paying a bill late can result in expensive late fees, a reduction in your credit line, an increase in the interest rate for the account, and a decrease in your credit score.  In order to insure that none of your bills are ever paid late, pay each of them as they arrive in the mail.  This virtually eliminates the chance that you will forget to pay them and increases the chances that your bills will be paid before the money is spent on other items.

Review Your Credit Reports Regularly

It is very important to know what has been added to your credit report, as the information in your credit report affects your life in many different ways.  The information in your credit report is used to calculate your credit score, which determines the interest rate you receive for various financial products.  The information is also used by property owners and employers to determine your suitability for their location after you have submitted your application.

Every person is entitled to one free copy of their credit report each year from each of the three main credit bureaus, so reviewing one of your credit reports every four months will give you a good picture of your creditworthiness without costing you a dime.

Pay Yourself First

Many people do not have any savings available because, by the time they are done spending on everything else during the month there is little money left.  If you want to make sure that you are saving money for your future, put the money into your savings account as soon as you are paid and before you begin to pay your bills.  This removes the money from your available funds, decreasing the chance that you will spend it on something else.  Many employers now allow their employees to direct deposit their paychecks into multiple bank accounts, so set up an automatic deposit of a portion of your paycheck into your savings account each pay period.  This allows you to save money without having to think about it.
How about you all? What habits have you adopted to help you save money? 

 Share your experiences by commenting below!

    ***Photo courtesy of http://upload.wikimedia.org/wikipedia/commons/3/33/Money_555.jpg

    Comments

    1. John S @ Frugal Rules says:

      Good points. We do many of them. I think paying yourself first is key to helping establish a good budgeting and saving discipline. Ours is automated so we don't even feel the amount coming out.

      • Toi Williams says:

        Automating the savings deposit seems to be more effective for most people than physically making the deposit. It also eliminates any excuses for not saving.

    2. Staying out of credit card debt, and paying yourself first, are both great ways to go. Another really good habit, which can help with these and other behaviors, is the habit of having self-discipline. Do what you know is right, defeat temptations to spend, and we can do really good things with our finances.
      My recent post The Fallacy of Sacrificing Health for Money

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