Many people want to improve their lives by developing healthy financial habits and goals for themselves and their families. Because financial concerns are such a big source of stress for millions of Americans, it’s important to learn more about what you can do to grow your financial resources and protect your family. If you’re interested in creating good money habits and teaching your children to do the same, explore some crucial steps on the journey to better financial health.
1. Learn to Budget
With a budget, you can clearly see your expenses and income to fully understand where your money is going and why you might be in debt. A budget also shows you where you can cut costs and save a little bit more.
To create a budget, you must track your incoming and outgoing transactions and record them for a few months before you can start making changes to keep your personal finances in check. Follow these steps to create your first budget or improve on one you might already have:
- Gather all your financial statements for the last three months, including bank statements, utility bills, mortgage or rent information, and credit card statements.
- Record your net income amount — the amount you take home after all taxes have been deducted from your paycheck.
- Write down all your monthly expenses and break them down into two categories: fixed expenses that stay the same each month and variable expenses that change.
- Subtract your expenses from your income to determine if you’re overspending every month and incurring new debts.
- Make adjustments to your expenses. Start by reducing non-essential spending on eating out and entertainment.
2. Protect Yourself From Fraud
Since everything from utility bill payments to credit cards is moving into the virtual world, it’s more important than ever to protect yourself from fraud online. There are a number of ways you can protect yourself, including awareness of common scams, using passwords on all your devices, checking your credit report, and changing your passwords frequently.
Phishing Scams
Phishing is one of the most common ways that scammers manage to gain access to the private information of honest citizens. If you see an unsolicited email from any company requesting that you verify your data, be very wary. Some of these emails are simply looking for confirmation that your email is active, while others are more insidious — looking for personal information like credit card numbers, social security numbers, and passwords. Never give out your information unless you are 100% sure of the source.
3. Include Your Children
Part of developing healthy habits is teaching your children these habits as well. No matter their age, there are small steps you can take to help them understand the value of money and what they can do with it. Who knows, you might be raising the next business mogul or entrepreneur genius.
Waiting to Buy
Delayed gratification is a very important skill in today’s instant world. When you force your children to wait before giving them something they want, they learn about discipline in spending. You should frequently reinforce that you don’t always buy something the moment you want it. Once they understand this, they won’t be as eager to spend their allowance or paycheck right away.
Teaching Them the Rule of Thirds
One way to get your children interested in budgeting their money is to talk to them about the rule of thirds. Whenever they get money — from doing chores, as a birthday gift, or when they get their first job — encourage them to split that money three ways. One third gets put into a savings account for a long term investment like college, one third goes away for a big purchase like a new phone or toy, one third gets spent right away.
Comparing Products
Teaching your children about price and product comparison is an important tool that they will use for the rest of their lives. Talk to them about why two products that seem the same might be different prices. They can use their judgment to determine when it’s worth it to spend more money on a particular product and when they should buy the budget item.
Taking them back to school shopping is a great opportunity to help them practice. Give them a set budget and a list of items to buy, then let them shop to see if they can stay under budget and get everything they need.
Making Mistakes
Your kids are probably still young and making mistakes with their money. If you see them heading towards a purchase they may regret later, let them buy it anyway. Learning about consequences first hand prevents them from making similar mistakes in the future when the stakes are higher.
4. Create a Family Saving Collage
Since you want to pass on healthy financial habits to your children, you should get them involved in your goals as a family. Create a bulletin board or collage that showcases what exactly you and your family are saving up for. Is it a vacation you’d like to take together? Is there a new video game they’ve been begging you for? Maybe it’s time to save up for a car or to start teaching them about saving for college? Whatever their age or their goals, put something up on your board that gets them excited and engaged about saving money together.
5. Talk to a Consultant
You might be a novice when it comes to creating good money habits, but don’t let that stop you. There are tons of online resources that can guide you towards making better decisions. You can even take your education a step further and talk to a financial advisor who can teach you the right steps to take towards financial health.
Non-profit financial advisors are focused on empowering you to make the right financial decisions through education and financial literacy. They are there with advice for everything from personal finances and investing to buying a house or starting a business.
Final Thoughts
Your finances can be a very simple part of your life once you understand them. Incorporate these top money habits into your routine today and experience the immediate change they can make to your finances.