Money-Saving Habits Reduce Debt, Build Wealth
By: Cayla Keyes
South Sixth Branch Manager
Forming habits takes commitment.
The bad news is that it usually requires a lot of effort and focus. But the good news is when it comes to your finances, long-term commitment leads to less debt and more freedom to spend and save your money according to your priorities.
When it comes to realizing your financial goals, certain habits give more return on investment, so to speak.
What are some of the best habits to cultivate in order to reduce debt and build wealth? Here are eight ways to get your financial life on track and moving toward the progress you want to see…
- Stop adding to your debt. In simplest terms, debt means obligation to someone other than yourself. And if your money is obligated to go elsewhere, you can’t use it to further your personal goals.
- Go automatic. It’s a lot easier to make something a habit when it’s automatic, and bonus: it frees up your mental energy too! With INB’s Pocket Change program, you can round up each of your debit card purchases in the amount you choose, from the nearest $1 up to the nearest $9. We then take that extra money and move the funds into your savings account at the end of each day. You can also automate your bill payments, your retirement contributions and your savings accounts; then, all you need to do is just check in and watch your savings grow.
- Track your spending in the simplest way possible. The truth is that you will never know exactly how you are spending your money unless you keep track of it. But the other piece of that is that you’ll never stay on track if your process isn’t easy to maintain. Whether it’s a written budget or a budget tracking app, figuring out where your money is going can be eye-opening. (Use INB’s budget tool to get started.)
- Plan for the unexpected – both expenses and windfalls. Categorize unexpected expenses in your budget. It feels like a large wedding gift or a furniture purchase are one-time events, but those occasions seem to pop up every month, don’t they? Rather than send your budget over the edge each month, plan for the unexpected to stay on target. On the same note, don’t let financial windfalls be eaten up by the everyday; plan to put those aside for specific goals like paying off debt or saving.
- Prioritize value and time. Driving to the store across town to save $5 on groceries isn’t the best investment because you’re likely not accounting for your time, gas and wear on your car. Buying cheap kitchen items won’t save you money in the long run if you’re replacing them every year, so shopping for value over cost should play a large part of your long-term personal finance strategy.
- Control your extracurricular activities. All work and no play is no way to live, but if your hobbies are eating up all of your cash, maybe it’s time to explore activities that are less expensive and still enjoyable. A picnic in the park on a nice day can be just as refreshing as dining at a restaurant, for example, and a lot less money.
- Set goals. There’s a reason everyone lists this strategy: because it’s actually effective. Maybe it’s saving for a large purchase or eliminating a certain amount of debt – whatever it might be, break down that amount each month for the next 6 or 12 months and find a way to save or pay off debt. Working toward a goal is exciting and builds positive momentum – not only financially but also within other areas of your life.
- Finally, communicate with those around you. Accountability is helpful, but it doesn’t stop with personal responsibility. Money can sometimes feel like an awkward subject that we tend to want to avoid. But by communicating well with family and friends about your financial goals and the money habits you’re working to cultivate, you can build a support system of people willing to help you reach your goals instead of hindering you with requests to go shopping or out to dinner.
Not sure where to start to get your finances on track? At INB, we truly do make banking easy, and we’re always happy to help you work toward your financial goals. Give us a call today or stop in to any of our branches in Central Illinois!