Ask ten people what it means to be financially stable, and you’ll likely receive ten completely different answers. But whatever your personal definition of financial stability might be, the most important thing is making it a reality.
Reaching a point of financial security is a process that takes time, effort and yes, a little sacrificing. The results are worth it though, and starting early can give you a huge leg up down the line. To get you started, here are 11 good financial habits that can help put you on the road to financial security.
1. Be organized. Keep your financial records together and figure out an organizational system that works best for you.
2. Use direct deposit for your paychecks. Direct deposit is a faster, safer way to have your paychecks delivered to you that a printed check. Plus, you can elect to have a portion of your check deposited into a savings account, which is a great way to ensure that you’re always saving!
3. Start saving for retirement. If your employer offers a retirement plan, contribute as much as you’re able. Remember that retirement savings deductions are taken pre-tax. If your employer doesn’t offer retirement options, consider starting an IRA for yourself.
4. Set up an automatic savings program. Commit to having a set amount of money transferred to your savings account each week, even if you can only save a small amount. Every dollar makes a difference!
5. Do a monthly budget. Take a good look at your income and monthly expenses. Write down the monthly expenses that you have: rent, student loan payments, bills, etc. Once those expenses are taken out, figure out how much you can afford to save, and how much you’re going to allow yourself for miscellaneous expenses. Discipline yourself to stay within your budget, especially when it comes to entertainment and leisure expenses.
6. Create a personal balance sheet. A balance sheet helps you calculate your net worth—the difference between your assets and your liabilities. It’s a good practice to update your balance sheet at least a few times a year so that you always have an accurate idea of where you are financially.
7. Use credit cards wisely. Credit card debt can add up quickly and can put you in a tough financial spot. While it’s tempting to be able to buy things today and not worrying about paying until tomorrow, remember that “tomorrow” will inevitably come and you’ll need to pay your balance. A good practice is to make sure that you can always pay your balance off in full each month, that way you’ll never get hit with high interest rates. If you think you’re likely to carry a balance month-to-month, be sure to shop for a card with a good interest rate.
8. Make credit card payments promptly and pay more than the minimum. If you find that you are carrying over a balance on a credit card, make every effort to pay more than the minimum—not doing so can lead to trouble for your credit score, and can increase your monthly payments in the long run.
9. Reconcile your checking account monthly. Keeping a close and careful record of your transactions will help you to ensure that you always have enough funds in your bank account and avoid overdraft fees.
10. Review all your bills and statements as soon as you receive them. You should make a point to look at your bills and statements as soon as they’re available to check for any discrepancies and see if any action is needed.
11. Get smart! Take every opportunity to boost your financial literacy—check out financial columns and blogs for the latest advice, and don’t hesitate to talk to your banker or financial advisor if you have questions.