Every financial choice you make strengthens a habit. With the right guidance, you can create positive financial habits. In this article, we’ll discuss 9 tips to help you take control of your money and move forward financially.

9 Tips for Developing Good Financial Habits

With consistent effort, you can build healthy financial habits. Managing your money well improves your financial health and increases your chances of achieving your goals. Here are some steps you can take today.

1. Recognize that you can have a positive relationship with money

Improving your finances starts with changing how you think about money. Letting go of negative emotions like fear or insecurity can help you overcome barriers to financial well-being.

Australians, according to the Australian Psychological Society, often worry more about money than anything else in life.

Your relationship with money isn’t fixed; it can evolve over time. Here are three important things to consider:

– Money involves emotions, not just math.

– Avoiding money issues may create ongoing stress.

– Your background may shape how you manage money.

With self-awareness, you can begin to make more confident money choices.

2. Know where your money goes  

Small steps help develop new habits. Start by tracking every expense for a short period, such as one month. This will give you insight into your current spending patterns and may highlight areas where small expenses add up.

For example, buying a $4 coffee five days a week costs over $1,000 per year. Tracking your spending can also reveal unnoticed expenses, such as unused subscriptions. Record each transaction in a way that works for you, whether on paper, a journal, or an app like Pocketbook.

3. Set savings goals and budget to reach them  

Setting goals begins by visualizing a future that doesn’t yet exist. By imagining your goals and the time frame for achieving them, you can create realistic steps to make progress over time.

When setting goals, think about:

– What’s important to you financially?

– Where would you like to live?

– What lifestyle do you want?

– What balance do you want between work and leisure?

– What tools do you need, like a laptop for work or entertainment?

– Where would you like to travel?

– Would you like to live or work abroad at some point?

A good approach is to use SMART goals—Specific, Measurable, Achievable, Realistic, and Time-bound. For example, if Linda wants to visit Western Australia in 2021, she would outline the specifics of her trip, set a budget, and plan how to save for it.

Budgeting can help you achieve financial goals like buying a new car or going on a vacation. Try finishing this sentence: “If I create and stick to a budget, I will be able to __________.”

4. Use a simple three-category budget 

A key to budgeting is simplicity. First, figure out your income (after tax) and then divide your expenses into three categories:

1. Commitments: These are necessary expenses like rent, loan repayments, or utility bills.

2. Everyday expenses: This covers food and other daily costs.

3. Occasional expenses: This includes discretionary spending on things like clothes, gifts, and entertainment.

This simple system can help you see where you can cut back, especially on occasional expenses. When considering a purchase, ask yourself, “Do I need this?” If not, “Do I want it enough to give up something else?” This makes budgeting more manageable.

5. Pay yourself first

One of the most effective ways to save is to automatically set aside money from each paycheck before paying other bills. This ensures you’re prioritizing savings.

By sticking to a budget, you may have extra money left over to start saving. Opening a savings account, which often has higher interest than a checking account, can help grow your money through compound interest. Saving regularly, even in small amounts, builds resilience over time.

6. Plan for emergencies  

Unexpected expenses can happen at any time, so it’s smart to have an emergency fund. Set aside enough money to cover unforeseen events, such as car repairs or medical bills. Once you have your emergency fund, you can focus on saving for other goals.

7. Work on reducing debt 

Debt isn’t always bad, especially if it’s used to invest in your future. However, it can be challenging to reduce debt once it builds up. Start by listing all your debts and prioritize paying off the ones with the highest interest rates first.

A credit card balance transfer can also help by moving high-interest debt to a card with a lower rate, reducing the overall interest you pay.

8. Boost your superannuation contributions  

Retirement may seem far away, but planning early is important. Superannuation is a tax-efficient way to save for your future. You can boost your retirement savings through salary sacrifice, after-tax contributions, consolidating your super funds, or spouse contributions. The sooner you start, the more you can benefit from compounding growth.

9. Consider investing as part of your financial plan 

If you’ve started saving and contributing to your super, you might want to explore other investments to maximize your long-term returns. It’s easy to feel overwhelmed by investment options, so seeking advice from a financial planner can be helpful.

Investing requires time and patience. It’s important to assess your risk tolerance and understand that with higher returns usually comes higher risk. Starting early allows you more time to achieve your financial goals.

Your money habits shape your financial success

The habits you form today will influence your future financial well-being. The good news is that you have the power to change your habits and set yourself up for success.