10 Ways You Could Have Better Money Habits Today
Too many financial goals feel out of reach for the average person. Buying a home or car, retiring early or simply affording a vacation can feel like unachievable dreams. But accomplishing a goal, no matter how lofty, can start with small changes. We found 10 ways you could have better money habits today to help you reach your goals.
We’ll talk about habits like following a budget, using credit cards with perks and comparison shopping for expenses like car insurance.
10 of the Best Ways to Have Better Money Habits
You don’t need a huge raise or to win the lottery to start improving your financial future. These better money habits can get you on the right track.
1. Open a High-Yield Savings Account
This one is a Penny Hoarder favorite. Saving money is great, but if you’re letting it sit in a traditional checking or savings account, you probably aren’t earning much interest — if any at all.
A high-yield savings account will have an APY between about 3.00% and 5.00%. If you have an account with an APY on the higher end, put $100 in it and never add anymore money, by the end of the year you’d still earn $5. Though we of course recommend adding to your account as you can, it shows that you get more money with very little effort.
To make your search easier, check out our picks for the best high-yield savings accounts. It lists the account opening minimums, fees and more.
2. Make a Monthly Budget You’ll Actually Use
Creating a budget is one thing. However, not everyone who has one can say they’re actually following it. Of course, life is unpredictable. You could budget a certain amount for car maintenance, then one of your brand new tires ends up flat. Your vacation budget can get out of hand when you miss your flight and have to buy a new ticket.
The main hurdle is to put one together that you feel is reasonable for your lifestyle and goals. You don’t need to follow the same budget as your friend who is saving for a wedding if that doesn’t apply to you. But most budgets will have fixed expenses (phone bill, car payment, etc.), variable expenses (like groceries and gas) and a category for entertainment and savings. It’s nearly impossible to reach financial goals if you’re not paying attention to where your money is going. Then, you have to stick to it to the best of your ability.
3. Use a Budgeting App to Track Your Spending
You have an app for everything else — let the convenience of budgeting apps help you too. There are some apps that are free and others that have a fee. However, they also make budgeting much easier with automated tools and comprehensive monitoring, so the fee may be worth it if the app has the features you want.
One of our favorite apps is Cleo. It’s a chatbot that’s also programmed to help track your spending and crush your bad money habits before they get serious. Cleo can round up your purchases to the nearest dollar and save the difference or “fine” you for overspending at Target.
We also have a comprehensive list of the best budgeting apps so you can find one that works for you. For example, Monarch allows you to track your spending by either merchant or category.
4. Set Up Automatic Transfers to Savings
You can automatically transfer money into your savings account from your checking account, but you can also do it with some budgeting apps (another feature with Cleo). No matter how you do it, this is one of the easiest ways to have better money habits. Once you know how much of your paycheck you can (and want to) put in your savings account, you can set the automatic transfers and not think of it again. That is, until you do finally get that raise and want to put even more into your account.
5. Comparison Shop for Recurring Bills Like Insurance and Internet
If you’ve never compared your car insurance options, you could be paying more than you need to. In fact, even if you have done this before, you still could be overpaying. You should be shopping around at least once a year around renewal time to make sure you’re still getting the best deal. This is true for expenses like your internet and phone bill too.
This could be a lot of work and research, but this new tool from The Penny Hoarder gathers all your best options for auto insurance together in one place, so you don’t have to waste time browsing endless insurance sites for a better deal. On average, drivers who shop around tend to save $860 per year or more.
6. Cook at Home More Often to Cut Food Costs
This one only works if you do it a certain way. Say you buy a million ingredients for one recipe, the majority of which you’ll never use again, then throw out the leftovers because you live alone and can’t eat it all. And that’s all for one dinner. Then did you really save sooo much money because you didn’t go to Chipotle? Probably not.
You’ll have to do meticulous yet reasonable planning. Don’t try to convince yourself you’ll eat the same meal seven days in a row if you won’t. Also, pick meals where you already have a lot of the ingredients or that you could reasonably use again before they go bad. There are also tons of resources for budget-friendly meal ideas online.
Buy freezer friendly containers so you can keep the leftovers and enjoy them in a few weeks. If you do want takeout, you can also save by picking up your food rather than getting it delivered.
7. Pay Yourself First With Every Paycheck
This is a popular personal finance method that encourages you to prioritize savings over spending. So you “pay yourself” by putting money in savings before you start allocating the money elsewhere. This will be easy to do if you’re on board with automating your savings transfers. That way that money is “out of sight and out of mind.”
8. Review and Cancel Unused Subscriptions
Needing a subscription or membership for more and more things isn’t just annoying. It’s making it harder for people to keep track of their spending. This is especially true when so many of these memberships don’t seem like a lot of money at first. But then as you accumulate more and more, soon you have $50 or more you’re wasting each month.
Luckily, an app called Rocket Money can show you exactly where you’re wasting money on forgotten subscriptions and bills that are overcharging you. It saves its members an average of $720 per year.
You can use it to easily hunt down and cancel unwanted subscriptions and even help negotiate lower monthly rates with your internet company, phone company and other bills — on average, they can help lower your bills by about 20%. Just register an account and link your bank accounts, then sit back while Rocket Money goes to work.
9. Use a Cash Back or Rewards Debit Card
If you’re doing most of your spending with cash, debit cards or credit cards with no rewards, you’re missing out on a lot of perks. Cash back and rewards credit cards are exactly what they sound like: Cards that get you money back, a sign up bonus, miles you can use on travel and more.
Cash back cards typically offer 1%-5% cash back, sometimes on all spending but often on certain categories, like dining or gas. These are our picks for the best cash back cards.
Rewards cards are similar. Sometimes they get you cash back, for other cards it’s miles or points to use on travel. These are some of the best rewards cards out there.
Things to watch out for with either type of card include annual fees (which are typically higher with cards that offer travel rewards) and interest. Just like with other credit cards, you’ll have to pay off the balance in full each month to avoid paying interest.
10. Set Simple Short-Term Money Goals
Feeling ambitious? That’s great! But don’t set some kind of crazy goal that will leave you feeling discouraged or deprived.
You know the fable of the frog in boiling water? You’re the frog and the better money habits are the water. If you currently dine out three times a week, reduce it to one for at least a month. Don’t swear off restaurants for life. Put aside even $10 from each paycheck if that’s what you can manage. Then slowly build from there. Gradually dialing up your better money habits will do more good than doing a complete 180 on your current lifestyle (unless that’s what you really want, then go for it).
