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5 Good Money Habits

Five principles of money management that will help you secure your financial future.

Who do you talk to about money? Where did you develop or learn your philosophy of money management? Did you know less than half of Americans learned about finances from their parents? 85% of American parents thought that a course in personal finance should be a requirement, but less than 5% of Americans learned money management in school. The overall majority of folks learned basic money management on their own.

Because of poor money management, more than half of all workers in the US have less than $25,000 in total savings—including their retirement funds. And, to make matters worse, total retirement benefits provided to employees has decreased from 8% of pay to less than 6% in the last 10 years. That coincides with a recent government report that says 95% of ALL retirees will retire dead broke, dependent or will have to go back to work!

Since none of us want to be paupers when we retire, let’s look at a few good financial habits that I think will help us reach financial success:

Habit #1: Pick up a and read it! As simple as that may seem, I’m always amazed at the percentage of people who do not own, nor have ever read a financial success book. If you have no knowledge of money and investing, you probably will not save and in turn, doom yourself to a substandard financial future. To gain a basic understanding, go to the  and read some books on investing and money management. There are classes, CDs, and people who can help you as well, so seek them out.

Habit #2: Pay yourself first! You should save 10 to 15 percent of your income in some form of tax deferred or tax free retirement account. I know what you’re thinking… how can you save that much when you have bills to pay? That is why you should ALWAYS save first and design your life around what’s left. Besides, you’re the one who earned the money and you should also be the first to benefit from it. This habit must be the foundation of your money philosophy. Aside from the future earnings potential, saving 15 percent of your income does three other things for you:

  1. First, it makes you more confident because you won’t have to worry about little money emergencies. That confidence will show and make you feel better about yourself.
  2. Second, having money allows you to take advantage of financial opportunities. You would be amazed at the deals that are available—take , right now, as an example. But without money, it’s just an opportunity lost.
  3. Finally, I don’t recommend you spend your savings on frivolous things, but it would be great to avoid interest charges on important things like your kids . You can save a bunch of money by paying cash for things as opposed to borrowing with interest when the time arises.

Habit #3: Make your own lunch and avoid buying lattés or similar drinks every morning! I enjoy coffee in the morning and going out for lunch as much as the next person, but look at how much money it’s costing you in future earnings:

  1. Lunch: $7 per day x 5 days = $35 weekly / $140 monthly @ 8% for 20 years = $80,000+
  2. Lattés: $3 per day x 5 days = $15 weekly / $60 monthly @ 8% for 20 years = $34,000+

Of course these are exaggerated figures because no one I know eats out every day. And I’m not saying don’t dine out, but try to keep it to a minimum unless you’ve already fully-funded your 401K for the year, your IRA is maxed out, and you have three to six months of your take-home salary in an emergency fund. If you’ve done all that and are saving 10 to 15 percent of your income, then you can every day and night!

Habit #4: Avoid buying things you don’t need! One in 20 adults are obsessive shoppers, purchasing things they don’t need, use, or even want. For those people, shopping has come to fill various emotional needs—a type of self-expression, a sport, and for some, a means of peace. Many of us share that obsession in various degrees and we find ourselves buying stuff… just because it was there.

Credit cards are the number one reason people overspend and buy stuff they don’t need. Using cash is the antidote to overspending. It is one thing to whip out a plastic card, but it’s an altogether different thing to pull out your hard earned cash and watch it leave your hand; so use cash as much as possible. Stop by your before-hand and limit your purchases to the money you have on-hand.

Habit #5: Start today! Don’t wait until tomorrow to begin to change your habits, because procrastination is the #1 destroyer of dreams and good intentions. If you want to learn more about money, go to the or bookstore today. If you want to save more, open an IRA today. If your wallet is getting light…avoid the mall today!

There are many other good money habits you can develop; but the great thing is, you don’t have to develop them all. Begin to adapt them into your life one at a time, and then come-up with some of your own to become a master OF money, rather than be mastered BY money.

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