Healthy Money Habits for Healthy Finances

Psychology tells us it’s our thoughts that help create outcomes and what we believe we can create. But it takes more than just the thoughts, they have to be accompanied by action. You will already have established Money Habits, the repeated and unconscious actions you take with money, but they may not be as healthy as you need them to be to achieve your financial and life goals.

Researchers have shown that over 40% of what we do is determined by habits rather than conscious decision making. So If we can change some of those less positive habits into positive ones we can change our money relationship and many other aspects of our lives.

Here’s 10 healthy money habits to get your finances healthier for the year ahead.

1. Make Money Time

To make changes with money we have to make time for it. Time to think about it, plan, dream, take action and time to build new money habits. Set aside a regular day to make time for your money. Use this time to practice the following:

2. Make Money Purposeful

Ignore all the noise about other peoples goals and financial achievements and set life goals that are purposeful to YOU. The purpose is unlikely to be money itself, it will be something valuable to you, that you simply need money to achieve. These can be big goals or small regular ones, they just need to have meaning and value for you.

3. Pay Yourself First

This is the simplest action to take and probably the most impactful. Rather than save after you’ve spent, reverse this and put money aside for you and your goals first. Do this with every pound you earn, make or are gifted. Always you first, every time. Have a separate savings or bank account to keep this money in and be really clear with yourself what its purpose is.

4. Balance Ins and Outs

Once you’ve set aside money for you first, use the remainder to cover expenses, outgoings and keep these balanced. Your outgoings have to be less than your income. If they aren’t balancing then focus on reducing outgoings and or increasing income. Reducing outgoings can feel uncomfortable but see it as a stepping stone to bridge the gap to creating more with the following habits.

5. Build Cash Savings

The money you are paying yourself first is to first build up your cash savings to cover emergencies and specific short term spending goals. If you have struggled with this before, check out these articles on how to successfully save and how to build an emergency fund

6. Manage Expensive Debt

Debt is not all bad, but you want it to be manageable, controlled and not more expensive than it needs to be. Review your debt, the balances and interest rates and create a plan to reduce or remove the expensive debt. If you’ve had a habit of buying new using a credit card then consider how you can make sure future spend can come from your cash savings.

7. Use a Save to Spend Plan

Not everyone likes the term budget, it can feel restrictive. But that’s what you are doing when balancing your ins and outs. It often becomes restrictive when we don’t build in plans and space to spend on things we love and enjoy. Create a plan for your savings, what is their purpose, what will you spend on and when? And what wont you? That’s what it is there for. Need more help with this?

8. Protect your Biggest Risks

Insurance has an important place in your financial health. It is there to cover the risks you cant afford today. Imagine the “What If” scenarios that you and your family might encounter, what if you lost your income, your partner lost their income, you were too ill to work or passed away. Speak to a protection adviser and protect the risks you can not afford to not cover.

9. Invest Consistently for your Future

Once you have built your cash savings to cover the emergencies, outgoings and short term spending goals, you have then look to start investing for the medium to long term. This money is not for you to access today or tomorrow but for the future, usually 5+ years or longer. Even if you start small, just begin the habit, keep it consistent, regular and leave it alone. Don’t rely on one investment, diversify to spread the risk and if you’re not sure then speak to a financial adviser or…

10. Prioritise Learning

Make learning and talking about money, finance, wealth and investing a priority and normalise a positive habit around this. Find reliable sources, books, podcasts, course and communities to learn from and shape the method that works best for you.

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