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Budgeting & Saving

5 Essential Money Habits for Financial Success

It seems like personal finance doesn’t become a priority to some people until something bad has happened. This can be because you don’t necessarily grow up with personal finance lessons, or maybe you don’t have the best examples to follow. Before things get out of hand, or if you’re in the process of building goals to reach financial independence, following these 5 good money habits will have you in great shape:

Keep Cash on Hand

One thing my family and friends know and can’t stand about me is that I almost never have cash on hand. I take for granted that most places accept debit or credit, so I don’t see a reason to carry cash. Aside from being prepared for those rare moments when an establishment is cash only (or if the parking meter only takes coins and not plastic), you should keep cash on hand for emergency situations, as well as a way to budget better. I’ve noticed that when I have cash on me, I’m more wise about my spending decisions. With my debit card being linked to my checking account, I don’t “see” the money, so it disappears a lot easier as well. Start keeping a set amount of cash in your wallet, even if you get paid via direct deposit.

Check Your Banking Activity Daily

It’s no secret that big companies are not exempt from being hit by hackers. Some of the biggest breaches lately have been Target and Home Depot, where consumers who used their debit or credit cards had their information vulnerable to thieves. While some were safe, just inconvenienced by having to get a new card issued, some people had fraudulent charges on their card, and lost a lot of money. They didn’t realize it because they weren’t monitoring their banking activity. Daily sounds a bit excessive, but it takes less than 5 minutes to check your recent activity in online banking. If you notice a charge that is unfamiliar to you, notify your bank immediately.

Check Your Credit Monthly

This is important, especially when you’re building or repairing your credit. There are 5 major factors that determine your credit score, but you should also keep watch of the things that appear on your credit report. Identity theft happens to many people, and is not found right away because the person either doesn’t have credit monitoring set up, or they don’t manually look over their report themselves. You are entitled to a free credit report from all three bureaus once a year, but it would be a good idea to invest in credit monitoring so that you may keep track of your accounts and your score.

Go to AnnualCreditReport.com to get your no strings attached free credit report. For credit monitoring, try Score Watch from MyFICO.com.

Set Up Automatic Savings Contributions

Saving money is hard to do when you have to remember to do it. To alleviate that pain, you should set up automatic contributions to your savings account. This has been proven to increase savings balances, because it’s set it and forget it. It doesn’t have to be a large amount of money as long as it’s consistent. I have $50 automatically deposited into my Capital One 360 account every payday, and it’s nice to see that account grow without me having to think about it.

Review Your Budget

Your budget this month might not be the same 6 months from now. You should review your budget with new responsibilities or lifestyle changes. See how much money you have leftover after bills have been paid. Can you spend less in one category? Eliminate one altogether? Is one bill set to increase soon? Reviewing your budget and adjusting accordingly will close those opportunities for money to go into the abyss, and can help you save more money in the long run.

Need help creating a budget? Get a budgeting template and tools for financial success in the Young Finances Toolkit.

What are some other money habits you suggest? Do you follow the ones above?

Originally posted 2014-11-12 06:00:27.

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