The six habits, when used consistently, will transform your finances and have you getting out of debt and reaching your financial goals.
Don’t we all wish that money was a set it and forget it activity? I know I always did. I wanted to be able to simply check some financial activity off my to-do list and know I was all set.
But, money doesn’t work that way.
To transform your finances, you must pay attention to your money. There are however a few simple habits that can make your financial life a whole lot easier and I’m going to share them with you.
6 Simple Habits That Will Transform Your Finances
SPEND LESS THAN YOU MAKE
If I were writing the Bible of Finances, this would be the first golden commandment.
For some of us, this one simple habit can make the biggest impact and transform your finances almost instantly.
Spending money for the sake of spending money is the worse thing you can do. But unfortunately, people do this all the time when they head to the mall with no shopping goal in mind. Before they know it, they’ve spent three hours and hundred of dollars later on things they might like, but rarely need.
This typically leads to using credit cards which lead to paying minimum balances and eventually you’re fully entrenched in debt.
What to do instead: Save!
That’s right. Open up a savings account and pay yourself first. Get into this habit easily and painlessly by automating your savings and have it deducted directly from you checking account into a savings account that is hard to get to.
I use which automates my savings and keeps my savings at arm’s length making it more difficult for me to spend frivolously.
Related: Spending and Debt Quiz
DON’T SHOP TO FILL UNMET NEEDS (AKA EMOTIONAL SHOPPING)
Shop too much? Transform your finances in the biggest way with this next tip. We’ve all done it. We have a fight with our husband or significant other and our first inclination to feel better is to go and spend some money.
We’ve all done it. We have a fight with our husband or significant other and our first inclination to feel better is to go and spend some money.
The problem? Have too many bad days where this is the solution to your problems, and you could easily be staring at thousands of dollars of debt.
Instead of shopping every time you have a bad day, your boss yells at you or your kids won’t listen, learn to find solutions to your feelings by choosing activities that don’t involve spending money.
This takes a bit of work because at first glance most of us don’t fully understand what it is that’s missing in our lives.
But if you can sit with your feelings and do some digging you can eventually uncover the need that’s not being met and then chose an alternative activity to make yourself feel better.
In the end not only will you save a ton of money, but you’ll learn oodles about yourself and find out how to get your needs met healthily.
Related: The Emotional Side of Money
STAY CONNECTED TO YOUR MONEY
Stay connected to your money, hmmm. Some of you are probably wondering what on earth I mean by that!
With the advent of credit and debit cards, we took cash out of people’s hands and replaced it with little pieces of plastic very much like what casino’s do with gamblers when they exchange money for chips. When this occurred, anyone using plastic began to be disconnected with their money.
The result: mindless and often out of control spending.
The consequences of those actions: increased debt and credit card minimum balances that are often outside what any average person can afford.
The most successful way to reverse what credit cards have done is to stop using them and instead start using cash.
Studies show that consumers spend less when they hand over cold hard cash versus swiping plastic since cash not only feels more like real money but is! When you feel money leaving your hands and being depleted with each person, you are more likely to notice what you’re buying and are more careful about it.
So if you want to stay connected and reign in your spending habits, switching to a cash-only diet is the best move you can make to transform your finances.
CHECK AND CHECK OFTEN
Every morning, as part of my morning ritual, I open my online checking account and look at balances and transactions that occurred from the previous day. Some people may say this is overkill, but I disagree and here’s why.
In your past, you didn’t pay much attention to your finances. More than likely you sporadically looked at your bank account and never balanced your checking account. In the end, you found yourself overdrawn, tapping into overdraft protection and wasting a ton of money.
Checking your account daily helps to reverse those bad habits and turn them into real ones.
By reviewing your accounts each day you ensure several things are happening:
1. Deposits went through as planned
2. Bills were paid according to schedule
3. No fees were incurred
4. Allows you to make changes to scheduled bill pays
5. Monitors scheduled automatic drafts
6. Allows you to spot suspicious activity and report immediately
7. Allows you to check the status of checks you’ve written
If the thought of doing this daily seems overwhelming, I get it. But doing it daily will help to create this habit and pretty soon because you’ll have a better understanding of what you’re looking at, the task will take you less than 2 minutes each day to complete.
To me those two minutes are worth ensuring you’re money is doing what you want it to do and you’re not blindsided by overdrafts, fees and other issues.
Remember, you’re getting reacquainted with your money and paying attention to the details, all the details you ignored previously.
These habits will have a cumulative effect helping you gain a better understanding and handle on your finances.
TRACK YOUR INCOME AND SPENDING
Tracking your income daily is something I learned when I was digging myself out of my financial mess. Fifteen years later, I still track my income and expenses.
I have an excel spreadsheet where daily I track all income that comes to me from all sources. It doesn’t matter if it’s a check for $1,000 or a rebate check for $1.99. All income that I receive is recorded onto this form.
People often asked me why I do this. In the beginning, when I first started my business it was a way to visually see my business growing. But more importantly, it was a way for me to put money front and center every day. It was yet another tool I used to stay connected to my money and change my financial circumstances.
In the end, it did transform my finances, and because it worked for me, I believe it can work for you too.
If you’re married or in a partnership, include money from everyone in the house. Click here to get my Expense Tracking Form!
** A little energetic money hint: Don’t put a zero on any day where no income is collected, just leave it blank.
What you’ll discover after doing this for a while, is how quickly more and more money begins to come to you. Sometimes it just shows up, like the time I found $5.00 on the street or the time I found $20 tucked under my front seat car mat. It literally will start showing up!
My theory is because you’re paying attention to your money, money decides to start showing up for you. I know that sounds a little out there, but it’s my theory, and I’m sticking to it!
Track Your Expenses
If I were to ask ten people if they liked tracking their expenses, maybe one person would raise their hand.
I get it; no one wants to track where their money went. I know I hated it and was very, very resistant to tracking.
But here is what I know for sure:
Tracking your expenses automatically leads you to spend less money, which leads you to transform your finances in a big, big way.
The purpose of tracking is to take a snapshot of your spending habits and figure out where it all goes. It is only by doing this you can begin to change your habits.
Track your spending and you’ll…
• Plug leaks in your spending
• Reduce spending
• See how reducing small amounts in lots of areas add up to something significant
• Begin to live within your means (and save)
• Know where your money is going
Financial freedom will come when you know what happens to every dollar and become reluctant to see it go.
You will become more frugal and thrifty and feel accomplished in doing so.
The first time you track your spending, try not to edit your spending habits. If you can, do this exercise for a month. At the end of the month add up, by category, what you spent during that month.
What you’ll find is you had no idea you were spending that much money and spending it on the stuff you were spending it on.
That’s what happens. Without the data, you’re just guessing where your money is going.
DEVELOP A SPENDING PLAN
We live in a society that’s all about getting what you want at all costs. Feeding the beast of consumerism is wrought with problems too numerous to mention in this article.
But what budgeting comes down to is living within your means.
Learning to live within your means takes practice, and the sooner you develop your spending plan, the sooner you’ll embrace the concept and transform your finances.
A spending plan isn’t intended to punish you, make you miserable or force you into a savings frenzy. It’s to keep you financially well, safe and prepared for the future. It’s about keeping your long-term goals in the forefront, not on the back burner.
Meeting your needs is at the core of most successful spending plans because it ensures your healthy relationship with money.
None of these six habits are all that difficult to implement and even if you decided only to implement one or two of them you’d see some changes in your financial picture. But the beauty of these six habits is the power to actually transform your finances from where they are now to something extraordinary.
If you’re struggling to get out of debt, want to curb your shopping tendencies, are sick of the overdraft notices and fees that are accumulating in your checking account, embracing these six habits will take your finances from chaos to clarity.
Transform your finances starting today – adopt these habits and watch the transformation unfold.
MY FAVORITE MONEY-SAVING TOOLS
EBATES: Want to earn cash back when you shop online? Ebates acts as a shopping portal offering coupons and cashback from over 2,000 online stores. I always check on Ebates first whenever I shop online! You can join Ebates for free and get a $10 welcome bonus when you sign up through this link.
DIGIT: Like the idea of saving but need something automatic? Digit is the perfect solution if trying to automate your savings strategy. In essence, what Digit does is use an algorithm to detect spare money and then transfers it to a secure savings account – so you’ll always have something to fall back on. Sign up for free!
GROCERY BUDGET MAKEOVER: Is your grocery budget giving you a serious kick in your families spending plan? Grocery Budget Makeover helped my family slash $6,000 a year from our food bill! Learn more about how Grocery Budget Makeover can help you save money too!