How to Change Your Money Mindset

Healthy financial habits are day-to-day practices that you can implement to improve your money management, prepare for financial challenges, and ultimately achieve your financial goals. Examples of healthy financial habits include making a budget, building an emergency fund, and minimizing debt. Below, we will run down the financial habits you should try to adopt.

10 Healthy Financial Habits to Adopt

1. Save as Much as Possible

It's good to get in the habit of saving as much as possible because most people don't save enough. However, trying to save money without a clear and well-defined goal in mind can make it difficult to prioritize saving over spending. Making a habit of creating goals using the SMART strategy (specific, measurable, achievable, realistic, and time-bound) allows you to track your progress and increases your chances of achieving your goal.

Some examples of SMART goals include: 

• Saving up $50,000 in 5 years to use as a down payment on a house.
• Saving $200 a month to build an emergency fund in two years.
• Paying $500 a month for a year to pay off all your debt obligations.

2. Sticking to a Budget

Making a budget allows you to plan out your spending, so you can make sure you have enough money for your necessary expenses. It can also make it easier to identify non-essential areas where you could cut back on spending to save money and help you plan out how to achieve financial goals.

You can create a budget using a spreadsheet or a budgeting app, like the WalletHub app. Budgeting apps can be more convenient to use than spreadsheets, since you may be able to sync your financial accounts for automatic tracking and set up alerts to notify you when you have hit your spending limit in a category.

You should make a habit of reviewing your budget regularly to track your progress. This gives you a chance to make adjustments, such as increasing your savings if you get a pay raise or cutting some expenses if you realize you are behind on your savings goals.

3. Track Your Spending

When you don't know where your money is going, it can be easy to overspend on things you don't need. That is why tracking your spending is an important financial habit you should have. Tracking your expenses allows you to immediately see if you are spending more than your income and can help you identify areas to cut back on spending. It can also make you aware of any fraudulent charges on your debit or credit cards that could potentially cause damage to your finances.

4. Build an Emergency Fund

According to a WalletHub survey, 45% of people are not confident they have enough money to cover an unexpected expense, such as a car repair or medical bill. Making a habit of setting aside a portion of every paycheck to your emergency fund can help make sure you have money available to cover unexpected expenses when they arise, so you don't have to go into debt. You should have three to six months' worth of your living expenses in your emergency fund, according to most experts.

5. Minimize Debt

About 1 in 3 people say their debt obligations prevent them from saving, according to a WalletHub survey. Doing things like paying your credit card bill in full each month and avoiding making impulse purchases you can't afford to pay back are healthy financial habits to have. If you have a lot of debt, you should make a habit of paying more than your minimum monthly payment to reduce the amount of interest you pay.

6. Find Ways to Reduce Unnecessary Spending

Nearly half of the respondents in a Bank of America survey said that they live paycheck to paycheck, spending all of their money on their expenses and leaving little or no money for savings. There are many financial habits you can take up, such as bringing lunch to work instead of buying it every day or waiting 24 hours before making a nice-to-have purchase, that can help you stop spending money. You can also sign up for a budgeting app, like the WalletHub app, that can give you insights into your spending and help you identify ways you can save money.

7. Review and Update Your Financial Plan

Your financial plan details your financial goals and the steps you're going to take to reach them. Your goals can change as you age, so you should regularly review your financial plan and update it to make sure your strategy aligns with your current priorities.

8. Be Vocal About Your Finances

Talk openly about your finances with your friends and family. Let them know how much you are willing to spend on different things, so they are aware of your spending limits. This practice is called loud budgeting, and the more you are willing to tell others about your finances, the more likely you are to stick to your budget.

9. Earn Passive Income

Passive income is money you can earn with minimal effort after the initial setup or investment. Renting out an apartment that you own to earn rental income or getting dividends from stocks are examples of ways you can earn passive income. This allows you to earn more money than your standard paycheck to save for future goals faster.

10. Monitor Your Personal Information

Your credit is an important part of your overall financial health, as it can determine whether you can buy a car, rent an apartment, or even get a job. However, errors or fraudulent accounts on your credit report can damage your credit and make it harder to get approved by lenders or creditors. As a result, it's essential to monitor your credit report regularly to catch mistakes or suspicious activity quickly and limit the damage. You can monitor your credit by checking your credit report regularly or signing up for a credit monitoring service, like WalletHub.

It's also a good idea to sign up for identity monitoring to get notified if your personal information has been compromised. WalletHub offers 24/7 credit monitoring and identity monitoring tools for free.

In addition, you'd be wise to regularly check your WalletScore, which is a tool that gives you an overall picture of your financial health by looking at factors like your credit, emergency preparedness, retirement, and spending. This will give you a good sense of how financially stable you are overall.

Pay your bills, save for emergency and future

The best way to manage a budget is to use a budgeting app to automatically track your expenses and alert you when you are spending too much in any budget category. You should also review your budget regularly and adjust your spending habits or how you allocate your income as needed.   

A budget can be tricky to manage, especially if you are new to budgeting, but the tips below can help you effectively manage...

Some of the best ways to save money on a tight budget include avoiding impulse buys, using free budgeting tools, comparison shopping, negotiating bills and automating your saving. These steps prevent you from paying more than you have to and help you save money for more important things.

Make a Budget

Best Ways to Save Money on a Tight Budget

1. Avoid impulse purchases

Buying items that you don't need on a whim...

The best way to budget your paycheck is to put 20% of the money into savings, allocate 50% to necessary expenses like food and your mortgage/rent, and use the remaining 30% for fun and other discretionary spending. This is called a 50/30/20 budget. 

There are other budgeting strategies you can try, too. But no matter how you decide to allocate the money from your paycheck, you will need to make a list of your expenses...

You should save at least 20% of your income each month, according to many financial experts. This number also aligns with the popular 50/30/20 rule, which requires you to put 20% of your income toward savings, while 50% goes to your necessary expenses and 30% is used for discretionary spending.

Saving 20% may not work for everyone. In fact, the current savings rate in the U.S. is 4.6%, according to the latest data from the...

One way to budget when your objective is to pay off your debt is called the 70/20/10 rule. This requires you to allocate 10% of your income to paying off debt, 20% to savings and the remaining 70% to your monthly bills and discretionary spending.

Making your debt payments right after getting paid can also ensure that you prioritize them and don't run out of money before spending the full 10%. If there is room...

Good money management skills can help you spend wisely, save for the future, and achieve your financial goals. Common sense goes a long way, but you also need to learn how to make a budget, track your spending, save for the future, build credit and more. Below, we will run down the money management tips you need to know.

Try WalletHub's budgeting tools!

1. Make a Budget

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To stop spending so much money, you can do things like create a budget, remove your credit card information from retail websites you frequent, use cash for in-person shopping, or try a no-spend challenge. It's also important to understand what causes you to spend money so you can address the root problems.

Psychological Reasons for Overspending

Spending money can sometimes be tied to our emotions. Some people may use retail therapy, or the act of making purchases to improve their mood, as a coping mechanism when they are sad or depressed. Shopping can give you an emotional high since it releases feel-good chemicals in your brain.

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The best way to organize your finances is with a budget that accounts for all of your income and expenses, a clear financial plan that sets you on the path to achieving long-term goals, and a commonsense record-keeping system. You also need a clear process for monitoring and updating everything, to keep your finances organized.

It's good to tailor things to your own preferences and habits as well. Similarly, if you have a partner, you should set aside some time to go over finances to make sure everyone is on the same page. Read below for more details on how you can organize your finances.

Start your budget for free

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