When you want to build better money habits, sometimes the best thing you can do is to start small.
Last year, I had a simple goal to check in with my budget every day. To do that, I attached the budget check to something I already do without fail—put on sunscreen. It doesn’t matter the day of the week, or if it’s raining or sunny, I always put on sunscreen without fail. While the lotion sinks in, I check my budget. A double whammy of good habits.
Establishing that new task as part of my existing routine got me thinking about what other good money habits could potentially compound over time.
And here’s what I came up with: a list of five healthy money habits that can drastically benefit your future financial health.
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How to Build Healthy Money Habits
#1: Set Financial Goals and Review Them Often
Building goals and savings targets into my budget 100% changed how I look at my money.
Establishing personal finance goals provides an opportunity for me to decide today who I want to be and what I want my life to look like in the future. Is that going back to school, buying a house, paying off debt, setting aside money so I can have a life of adventure? Whatever it is—we all have different priorities—it’s important to find your inspiration and the “why” behind your goals.
In 2019, I got really excited about planning our next vacation — Italy Summer 2020. I bought a guide book, created a Notion page with all the places I wanted to visit, and started to save money. When the pandemic hit, I thought, “I’ll just leave that money in there so it’s ready to go whenever we can travel again.”
As time went on, though, I fell into a bad habit. I started making impulse buys that would overspend a category because in the back of my mind I knew I had money sitting in the vacation fund that I could “borrow” from.
I didn’t like that feeling! But the thing is, my priorities had changed (hello global pandemic) but that shift wasn’t reflected in my budget. Going to Italy wasn’t my most pressing priority anymore.
I went back to the drawing board, thought through our priorities, and realized replacing our car was actually my #1 goal. The Jeep Fund was created and suddenly my motivation to stick money in our savings account was back! It helped me reign in my spending habits because I wanted every extra penny I could get my hands on for the Jeep Fund so that I could reach that goal faster. Everything else felt like a waste of money once I knew what I really wanted.
#2: Plan Your Purchases
Look ahead into the next year and identify things you’ll have to buy that don’t fall into monthly bills or big goals. These are things like:
- Birthdays
- Friends having a baby
- Getting a new job
- Random Acts of Kindness
- Gardening
- Home maintenance
- Home upgrades
- Fun purchases
- Giving
We often operate under the assumption that these one-off expenses are “surprises” or throw off a normal month—but in reality, they are wholly predictable and a little intentionality goes a long way at smoothing out your spending, avoiding credit card debt, and planning for the future.
See a list of other non-monthly categories to add to your budget.
#3: Check Your Budget, Not Your Bank Account
I was that person. I had my bank’s app right on the home screen of my phone, and I was always proud of myself if I remembered to check it before making a purchase.
I’d pull it up, see my checking account total, and think “Ok. I have that bill coming out tomorrow, and then…um…did the mortgage already come out? And is personal property tax this month or next month? Mmmm…I think I can afford this. I’m sure it’ll be fine.”
That financial habit got me in trouble more times than I can count.
Now, instead of doing that, I check my budget. I pull up YNAB, and I look at the category I want to spend money from to see how much I have available. With this approach, I always know exactly where I stand and my zero-based budget gives me clarity about my financial situation in a way my bank account never could.
#4: Automate Your Investing
After reading I Will Teach You to Be Rich by Ramit Sethi and The Simple Path to Wealth by J.L. Collins I ended up opening up a brokerage account and setting up a monthly transfer. I don’t think about that money. To me, it’s like a bill. I have a line item in my Monthly Bills category group called Investments. It’s nonnegotiable. And because I don’t think about it, I’m taking out the human element—aka the frequent urge to buy something else with that money.
I love what Jesse said in a recent podcast episode about how some people look at buying shares of an index fund as a purchase. So you can get just as much satisfaction from buying stocks, bonds, or contributing to your 401k as you can from buying things at Target. When I make those long-term purchases, I think of how I’m setting up future me to reap the benefits.
#5: Spend for Your Health
Like that 401k or Roth IRA, everything we can do today to prioritize our health is an investment in ourselves.
On the blog, Janelle tells the story of how her financial priorities shifted after some health issues. Her #1 focus had been on paying off student loans, but she realized she had to dedicate a bit more of her budget to the quality of food she was buying. Our well being — physical, mental, emotional—is worth investing in. It’s one of my favorite posts. Definitely worth checking out.
I’ve had a fitness category in my budget since the beginning to pay for things like a gym membership, but last year I added “/wellness” to the name. I bought a HappyLight, the premium versions of a couple wellness apps, and paid the copay for chiropractor appointments out of that fund. Much like checking my budget while my sunscreen soaked in, creating a budget category for products and services relating to wellness helped establish even more healthy habits. It all adds up…in a good way.
Maybe your habits look slightly different from my list, but one thing I know for sure: if you focus on those small, bite-sized healthy money habits today, you’ll completely transform your tomorrow.
Ready to start a budget of your own so that you can build your own healthy money habits? Try YNAB for free for 34 days.
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As a personal finance expert with a deep understanding of building and maintaining healthy money habits, I can attest to the transformative power of small, intentional actions in financial management. The article you provided offers valuable insights into cultivating a positive relationship with money and achieving long-term financial well-being. Let's break down the key concepts mentioned in the article:
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Setting Financial Goals and Reviewing Them Often:
- Establishing clear financial goals is crucial for shaping your financial future.
- Savings targets integrated into a budget provide a tangible roadmap for achieving those goals.
- Personal experiences, such as planning a vacation, demonstrate the importance of adapting goals to changing priorities.
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Planning Your Purchases:
- Anticipating and planning for non-monthly expenses, such as birthdays or unexpected events, helps avoid financial surprises.
- Intentional budgeting for various categories, beyond regular bills and big goals, contributes to financial stability and avoids credit card debt.
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Checking Your Budget, Not Your Bank Account:
- Shifting from checking bank account balances to regularly reviewing and updating a budget provides a clearer picture of financial standing.
- Using budgeting tools like YNAB enhances visibility and prevents overspending by allocating funds to specific categories.
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Automating Your Investing:
- Drawing on the advice from financial experts, the article emphasizes the importance of automating investments to ensure consistency.
- Treating investments as non-negotiable bills helps remove emotional impulses and supports long-term financial growth.
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Spending for Your Health:
- Drawing parallels between financial investments and health investments, the article highlights the value of allocating funds to wellness-related expenses.
- Integrating a wellness category into the budget reinforces the idea that investments in physical and mental well-being are essential for long-term happiness.
The article overall emphasizes the philosophy that small, consistent actions in managing finances can lead to significant positive changes over time. The personal anecdotes and practical examples make the advice relatable and applicable to a wide audience. It aligns with the idea that financial health is a journey, and building good money habits today shapes a more secure and fulfilling tomorrow.
