When it comes to financial habits in general, nurturing a set pattern of behavior could very well ensure a long, carefree retirement. Because of that, this year, it’s time to go big or go home and make changes that truly matter.
Essential Financial Habits Everyone Should Acquire
Before going over some practical financial habits that are going to be extremely important in 2020, let’s reflect on the ones that are always essential, no matter what day, time, or season it is. These aren’t just methods one should consider implementing in the new year. On the contrary, without them, there’s little chance any of the other practical habits would work quite well.
Stick to a Solid, Easy-to-Follow Budget
When there isn’t a reliable budgeting plan in place, tracking expenses and knowing where all the money is going each month is downright impossible. Luckily, not every budgeting strategy is as tricky as its name might sound. All it takes is some research and the will to actually follow through with all the requirements.
Of course, out of the various budgeting strategies that exist, there will be some that may not work for everyone. The 50/30/20 budget mostly works for people who have a steady income. In contrast, the “pay yourself first” plan is primarily for those who don’t need to worry about money and are looking for a budget that plays well with their short- or long-term goals.
Sometimes, the trick is in trial and error. Even trying out a few of these and giving up on them because they don’t work out is a step in the right direction. At some point, everyone will realize which strategy fits their lifestyle and income level best.
Set Up Automatic Transfers
In an ideal world, people would get a comfortable retirement without ever having to save a cent for it. However, since that’s not possible, the best course of action is to contribute to one’s retirement plan regularly, no matter which type it is.
Automatic transfers are here to save the day so that one never misses a chance to do so. It’s best to pull money instantly before the paycheck goes into the bank account. And, of course, it’s essential to increase the contributions every year to ensure maximum savings.
As for other automatic transfers, it would be wise to automate savings transfers, as well as bill payments. Sometimes, the key to allocating the income perfectly is rather simple and comes down to automating the most important things so that one could worry less overall. Besides, by paying bills on time each month, one would avoid any late fees, which could otherwise lower one’s credit score.
Finally, it’s best to set up a separate savings account to ensure the savings are out of reach. It doesn’t really matter what it will be used for; some people make it into an emergency fund, while others use it to save for a luxe vacation. But by having a separate account for savings only, one is less likely to pull money from it. After all, there are limits in terms of how many transfers one can make in a month.
Top 15 Financial Habits to Nurture in 2020
1. Wait It Out
Much like with everything “bad” in life, sometimes, it’s best to wait before making a drastic change or, more precisely, doing something that could hurt one’s budget. Whether someone is dealing with a severe case of shopping addiction or just cannot help ordering takeout, waiting for at least 15 minutes before doing something could pay off in the long run.
More often than not, those 15 minutes are enough for the craving to go away. Afterward, it may not be so tempting anymore to be financially irresponsible!
2. Never Go Anywhere Without a Shopping List
One of the best financial habits everyone should consider acquiring this year is planned shopping. Without a detailed shopping list, people usually fall into the pattern of buying everything and anything, no matter if they need it or not.
Besides, retailers know that most people are not looking to spend a lot of money while out and about. That’s why they implement all those sneaky tactics that make people spend money even if they aren’t supposed to splurge on anything at all.
3. Maintain Your Home and Car
It may already be obvious to some people, but not thinking about any potential car or home repairs in advance is a slippery slope. Life is full of unexpected twists and turns; no one really knows what the next day will bring once they wake up.
Thus, opting for regular maintenance, even when it costs a bit more money upfront, is the best policy. The budgeting plan one selects should accommodate for that expense; all it takes is to estimate the amount that regular maintenance would cost on a yearly basis and divide that by 12. That’s how much a household should save for unforeseen circumstances each month.
4. Set Up an Emergency Fund (and Refresh It When Needed)
Various resources online suggest that, in order to create a healthy budgeting plan, one has to take into account the emergency fund.
The amount found in that fund ought to help the household survive for at least three to six months without any additional income. That’s why it has the “emergency” in it; it’s not meant to be spent on anything else but the necessities if there’s a need for it.
However, what many of those resources don’t mention is how vital it is to replenish the fund every year (or more often). Depending on the rise in income, the amount of money kept in the fund should be changed as well. Besides, when a part of that money is spent on something, it ought to be covered by cutting down on some expenses fast.
5. Go for Value, Not the Price
More often than not, the best-value products aren’t the cheapest or the most expensive items. They usually fall somewhere in the middle, which makes them somewhat tricky to track down.
Thus, to ensure one is always going for value over price, reading reviews and asking for recommendations is imperative. Today, the world of blogging is so vast that one can easily find a person who can explain all the benefits and flaws of any product out there. Why not use that in 2020 and make sure one is spending their hard-earned money only on tried-and-tested stuff that makes each dollar count?
6. Live Within Your Means
If someone is trying to save money in 2020, one of the most useful financial habits to acquire would be living below their means. That would, of course, entail reducing some of their expenses and even finding a side hustle to boost their income.
However, if that’s not possible right now, then at least they could live within their means. And weirdly enough, that’s easier than one might expect.
People often forget that, when push comes to shove, they’re able to survive on a limited budget rather easily. Sure, it’s not always fun, and they definitely cannot afford some luxuries in that case. But the point is that it’s possible. And if anything, living within one’s means is a lot more comfortable than pinching pennies at the end of the month.
What does it entail? Well, it’s basically a compilation of every single piece of advice found here. Living within one’s means is the basis of all other financial habits and where the real work truly begins. Thus, it entails avoiding things that may drive someone into debt or make them spend more than they actually have, like credit cards and loans. The amount of money they have is the only thing they can spend; the rest should be automatically transferred into appropriate accounts and only touched when there’s a specific financial goal in mind.
7. Leave Credit Cards at Home
Knowing that there’s some “free money” on the credit card is a slippery slope for many people all around the world. They believe that they can afford some stuff just because their credit card doesn’t get denied at a specific moment.
But at the end of the month, they still have to pay off the balance in full. If they fail to do so, they actually open the doors to a whole lot of (financial) pain.
So what’s the solution? It’s really super-easy — those who are looking to improve their finances this year ought to leave their credit cards at home. They can always use cash, which is recommended, as it allows them to feel each purchase. If that isn’t an option, that’s what debit cards are for!
The point of this approach is to reconsider some purchases, of course. Most people rely too much on credit cards and aren’t able to pay the balance off in full later on because their spending habits are out of control. By eliminating the cause of the problem, they will have to conform to the limits of debit cards and cash. Hopefully, that’ll be enough to make them think twice about spending money on anything but necessities in general.
8. Don’t Settle for the Bare Minimum
While on the topic of credit cards, 2020 should be the year one gets rid of any credit card debt. However, to do that, they shouldn’t rely on paying off the bare minimum.
People are usually drawn to the idea of paying off the minimum only when they’re already pinching pennies. Unfortunately, they risk spending years covering a balance that could have been paid off in just a few months. Plus, going over the bare minimum comes with additional benefits, such as staying in the issuer’s good graces and lowering the credit utilization ratio.
And while on the subject of credit-related financial habits, it’s wise to check one’s credit report occasionally. Monitoring credit on a monthly basis would provide an individual with enough insight to recognize what they might be doing wrong. Besides, that would allow them to watch out for any inaccuracies or fraudulent activities, which could lower a person’s credit score and deny them getting the things they want in life, such as a great apartment or a better phone plan.
9. Do Your Taxes on Time
It’s universally acknowledged that nobody likes doing their taxes. Some even hate it so much that they’d rather pay someone else to do it for them! But the problem with doing one’s taxes is in procrastination — they don’t hurt so much if they’re done in time.
Thus, to prevent any stress in the next tax season, it would be wise to do one’s taxes every month. Those few hours that one would have to spend each month are a much better option than wasting days upon days worrying and stressing about the amount of work needed to get them in order before tax season.
Think of it as a time investment; by doing them monthly, it’ll be much easier to compile the taxes later on and file them before the deadline.
10. Assess and Manage Risks
Most people are well aware of the risks that revolve around them losing their homes or contracting a deadly illness. Because of that, it’s expected that all of them already have insurance that covers most of these scenarios.
However, there are other risks to take into account, such as a business losing profit because of a key employee leaving or a person becoming unable to earn an income ever again. Thus, this year, it’s imperative to reconsider the risks in one’s life and try to manage them as carefully as possible.
Whether the right solution is getting more insurance or covering the losses with personal funds, it doesn’t matter right now. What’s essential is that there’s a plan B that can cushion the blow of any life- or income-threatening event.
11. Incentivize Major Purchases and Goals
Although most people believe that the sheer fulfillment of their goals is sufficient reward, others may need a bit more to actually reach them. When there isn’t something to incentivize the whole process, it can become quite challenging to stick to all the rules of one’s budgeting plan.
Therefore, the year 2020 is the perfect time to put one’s personal desires to good use. If there’s a major financial goal an individual wants to achieve this year, it would be wise to break it up into several parts. For each of them, there will be an incentive and a reward if they’re fulfilled. However, to make it all the more exciting and ensure the eyes are always on the prize, there have to be some penalties as well.
12. Become a Better Shopper and Spend Less on Groceries
Nowadays, people are used to the abundance of food offered in supermarkets all over the country. But what they fail to remember is that just because something is there doesn’t mean it’s worth their money.
Food is indispensable, but going over the food budget every single month is bound to ruin any financial goals a person has set for themselves. Besides, saving on groceries is sometimes rather easy; most brands often have promotions and sales that allow people to stock up on their favorite items. What’s more, couponing could shave quite a bit off the overall expenses — and it even makes for an excellent hobby!
13. Analyze Your Spending Habits Every Month or So
Personal needs change each month, even when one has a steady income and fixed expenses. One month, one might have to figure out a way to buy three birthday presents; the next one, they might not have any additional expenses at all.
Tracking one’s spending is a must this year to stay on track and ensure there’s enough money for everything. It doesn’t have to be too elaborate if the bulk of the income already goes on food, shelter, etc. But wouldn’t it be nice to know where the remainder is going?
A simple overview of all the expenses could offer a person enough insight for them to know what their weaknesses are immediately. That, of course, would allow them to improve their spending habits in the following years. But more importantly, it should help them learn how to avoid unnecessary splurging.
14. Own Your Resourcefulness — Don’t Be Ashamed of It
Social media has changed the whole world, and platforms such as Instagram have made it seem as if everyone should be spending money on improving themselves. They’ve “earned” it and should treat themselves whenever they can if it helps their mental state.
But if that’s the trend now, what did people do before social media? Well, they had to be resourceful to save money for the greater good, i.e., some specific financial goals.
Financial habits aren’t only something one should acquire to improve their credit score. Some of them are rather simple lifestyle changes that could drastically improve one’s financial future.
So why not embrace them this year? If reducing some expenses is a must, there are plenty of tutorials online that show how to DIY pretty much anything. From at-home waxing to remodeling the whole house, people can do it all by themselves (or at least some of it) if they are willing enough to try.
15. Practice Saying “No”
Out of the many financial habits people should nurture, saying “No” just might be one of the most important ones.
Of course, that doesn’t entail saying “no” to a solid budgeting plan or maintaining a favorable credit score. What it means is that one should put some limits down to ensure a better future for themselves.
Sometimes, saying “no” to things is worth it, especially if saying “yes” jeopardizes any part of one’s budget or financial goals.
And no, that doesn’t mean one should never again have a $5 latte; the number of those, though, could be reduced to allow for more critical expenses in someone’s life.
Financial Success in 2020
The most vital financial habits of 2020 aren’t always easy to implement. Some of them may even prove to be a challenge to those who think they’ve successfully curbed their expenses.
But they are worth trying out nonetheless. These are an excellent starting point for anyone looking to make 2020 their best financial year ever. All it takes is to pick one and go from there; if one succeeds in going through with it, it might prove inspiring enough for them to continue working on their goals.