The start of the year is a great time to review and revamp our financial plans, including common resolutions like "save more money" or "pay down debt". Here are some ways to develop better money habits for 2015.
True savings happen when we deviate from our habits. You might already be doing many (or all!) of the items below, but for the rest of us, it's a reminder good money habits are all about small actions and important changes in mindset.
10. Keep Your Budget Simple
If you're into personal finance, it's easy to geek out on all the apps, graphs, and financial tools available, and it's also easy for our finances to get too complicated with lots of budget categories and subcategories. Take a more minimalist approach and sticking to a budget might be much easier. Remember, you don't have to track every single cent to maintain good money habits.
9. Establish Passive Spending Barriers To Save More Money
A few "rules" you create for yourself — such as using a 30-day list for your wants, paring down your stuff with the "two items out for every item in" rule, and emphasising experiences over possessions — can help keep more money in your bank account. You can also use indecision (when you can't decide between buying two things) as a trigger to not buy anything. Once you follow your rules a few times, these might turn into a wealth-building habit.
8. Cook At Home More Often
Cooking at home not only saves you money, it's also healthier for you. Plan your meals each week, upgrade your packed lunch, and enjoy delicious meals at home without spending a lot. Or mix money matters and meals: Organise a workplace money lunch, which is part financial support club and part lunch club.
7. Maximise Your Superannuation
If you have spare money that you can invest in superannuation, this will pay off when you retire. That's especially important once you've paid off a mortgage and eliminated others debts.
6. Put Your Money On Automatic
This isn't really a habit, but once you set up your automatic payments and savings, you've got time and energy to focus on the other money habits. Using automatic bill payment and savings plans, most of your finances can be taken care of like clockwork. Just remember to check in regularly to make sure everything's going as planned. Diagram your financial network to see how all of your financial services are linked together.
5. Give Up The Frugal Habits That Aren't Worth It
Just as important as establishing better habits is ditching the bad ones. Some frugal tactics aren't actually worthwhile, like driving for kilometres to save a few cents on petrol. To <a href="http://www.lifehacker.com.au/2014/11/money-saving-habits-that-can-backfire-and-wreck-your-finances/figure out if a frugal habit is really worth your time and energy, start with your hourly income and calculate the "time value" of that frugal habit. Find out how much your time is really worth with this calculator.
4. Ditch Bad Money Habits By Understanding How They Form
Habits start the very first time you make a choice, whether it's charging something to your credit card or deciding to stay in rather than dine out. Some habits can also be addictive, but if we know the psychology behind what drives our habits — our need for variety, for example, and feeling significant — we can turn away from bad habits and put more focus on new ones we want to develop.
3. Pay Down Debt With Bonus Money
Paying debt down is typically an ongoing activity, but you can accelerate your debt reduction by making it a habit to put all "extra" money (bonuses, cash gifts, tax refunds, and so on) towards your debt. Consider these financial windfalls as already earmarked for debt repayments and you'll see your debt disappear much more quickly than if you just made your standard payments.
2. Invest In Yourself
For every purchase, consider if it's in line with your personal values and your goals; otherwise, you might be either spending too much or simply on the wrong things. Make it a habit to question whether you're spending your money where you spend your time and prioritising the things that can boost your career or your earning potential...or spending it on something else.
1. Remember The Basics
Spend less than you earn and invest the difference.Pay off your credit cards in full each month. Don't buy things you don't need. Most personal finance books and articles boil down to the same bits of advice, but we still need them because it's all too easy to get off track. The start of the year is a great time to get back to basics, but set up reminders for yourself to maintain these good habits throughout the year. Visual triggers, like taped goals on your credit cards or simply calendar notes on every payday, could remind you of what matters most. Often, it's the little things that make a great difference.