Many people claim that they are just “bad with money,” and while personality traits and education play a part in money management, the way you manage your money is a matter of habit. And no matter how long you’ve been stuck in a cycle of poor money habits, you can always make changes. Money mismanagement can only be sustained for a certain period of time before financial collapse. If you’re ready to change your poor money management habits, read on for some ideas of habits that will help you break the cycle and start a new leaf of good money management.
Pay Your Bills on Time to Avoid Late Fees
Paying your bills might seem like an obvious habit that you need to be in, even having a few late payments is bad for your credit and your wallet. Companies charge hefty late fees for not paying bills on time. Let’s say on average you pay two bills late a month and fees for these bills combined are around $40. That’s almost $500 a year in late fees you are paying. That’s money you could be using for savings, debt, or going on vacation. If you have a paper calendar that you look at frequently, mark the days of your payment deadlines so you have a smaller chance of forgetting. If you want to make things really easy, set up electronic reminders on your phone so that you can even pay the bill online right after you get the alert. If you set up your bills to be paid on the same day of every month, this will also keep you from getting confused and letting one slide.
Track Money by Getting Text Updates from your Bank
There are many ways your bank can help you track your monthly spending, but if you never physically go into the bank or look at your account online, chances are you aren’t really tracking your spending or savings. With the widespread use of online banking, many banks will send you text messages immediately after money is deducted from your account. If you’re on a strict budget, these notifications make it easier to track your balance without logging in to your account online. All you need to do is sign up and then you’ll always be “in the know” about money going in and out of your account.
Automate your Payments
If paying bills on time is an issue for you, not only should you mark your calendar and make your payments fall on the same day, but you should use an automated payment method. Many companies allow you to pay rent, utilities and cable by automatically taking money out of your checking account each month. If you know you’re bad with remembering due dates, take yourself out of the equation. It will make things a lot more efficient, and you won’t risk ruining your credit with late payments. For some payments, you can choose the day that the money will be taken out of your account, so you can plan according to your weekly or monthly paychecks if needed.
Pay off Loans with Highest Interest First
Paying off debt can be a pain, and if you’re bad with managing your money, it only drags out the process. It’s important to pay off debt with the highest interest rates first because it’s the fastest way to clear your debt. Making minimum payments each month on credit cards with high interest rates ends up costing more money long term. While it’s important to keep up with terms of your standing contracts, prioritizing your debt payments can save you thousands of dollars. Once again, setting up automatic payments will ensure that you pay off debt before spending any unnecessary money. This way, you’ve got a minimum amount that you pay every month and on months when you get a bonus or make a little extra money, you can put that towards paying your debts off.
Pull Your Free Credit Report
Tracking your credit is a crucial part to improving your financial health. Your credit history determines how much interest you have to pay for loans when you are trying to buy a house or car. Everyone in the U.S. is entitled to one free check a year from the three U.S. credit bureaus. If you aren’t familiar with how a credit score works, or how to rebuild a bad credit score, you will want to speak to a financial advisor to get the specifics about your personal score. If you’ve had a lot of money mismanagement in your history, your credit score is likely in rough shape, so meeting with a financial professional will help you make a plan for rebuilding your credit as quickly and efficiently as possible.
Effective money management is a matter of replacing poor habits with good habits, and making small adjustments in order to get used to living the lifestyle of a good money manager. The habits above will help you to break the cycle of poor money management, and relieve any financial stress you might be suffering from. Even if you’re naturally bad with money, you are luckily living in the digital age, which means that managing finances is much easier because of the resources available today. Take advantage of these resources and let technology lend you a hand with money management.
written by: Dixie Somers