If you often wish for money in your bank account, there are only two ways to make that happen. The first, according to lore, involves finding a magic lamp with a genie. The second strategy for those of us who don’t have that kind of luck is to implement better money habits.
Developing better money habits is a pretty unexciting way to create wealth, but getting rich slowly is better than not getting rich at all.
And if you think about it, assuming you make a decent living, your current money habits are probably keeping you from attaining wealth. Similar to how being healthy is based on making smart choices like getting a good night’s sleep and counting calories, so much of having money in the bank involves improving your daily spending and saving decisions.
So if you’re looking to get your finances in tiptop shape, here are some smart habits to cultivate to help boost your savings account.
— Save more.
— Pay yourself first.
— Factor in taxes into your budgeting plan.
— Account for one-time purchases.
— Put fixed expenses on credit cards.
— Automate your expenses.
— Avoid lifestyle creep.
— Pare down your expenses.
— Look for financial waste.
— Create guardrails for your splurging.
— Track your net worth.
— Keep a money diary.
— Do a financial cleanse.
— Revisit your financial goals.
Save More
Yes, you are shocked to read this. Save more? Who would have thought? But, sarcasm aside, saving more money is an important money habit. And chances are, you don’t save enough.
Many experts suggest putting away 10% to 15% of your income toward your retirement.
If that seems crazy to you, and it may, try saving 1% of your income for a while and see how that works out, suggests Brent Weiss, certified financial planner and co-founder of Facet Wealth, a financial planning firm in Baltimore.
“Start by saving 1% of your income. From there, increase this percentage by at least 1% every six or 12 months,” Weiss says. The ultimate goal, he adds, should be to save at least 10% to 15% of your income.
“That may not be feasible for everyone,” Weiss says, adding, “But the goal is to start saving at least some of your income. The 1% pledge can jump-start someone’s savings.”
And if you wind up saving 6% of your income and never get higher than that, or you don’t for years, you’re still far better off than you would be if you had been saving 0.05% of your paychecks.
Pay Yourself First
You’ve likely heard this sage advice before, but it’s an important habit to put into practice. Before you are paid, you should determine a way to put your money into an separate savings account that you don’t touch, advises Rocky Lalvani, a financial coach in Harrisburg, Pennsylvania.
“This can be done through 401(k) deduction or automatic sweeps from your checking account,” Lalvani says. For this to really work well, “the process has to be completely automated and the money has to go somewhere it’s hard to access.”
[How to Automate Your Savings — And Why It’s a Good Idea]
Factor Taxes Into Your Budgeting Plan
“Think of your income in terms of net pay — the amount that gets deposited in your bank account after all deductions. It’s not how much you earn — it’s how much you get to keep,” says Laura Lonie, a certified public accountant and financial coach in Buffalo, New York.
“It is so easy to think, ‘Hey, I make $90,000 a year. Why am I always broke?'” she explains. “You may be netting only $60,000 after all deductions but living as if you have $90,000 to work with. You are broke because you are spending $30,000 more than you actually have available. Create your spending plan based on net pay.”
Account for One-Time Purchases
Helen Holden, the creator of CountingCandles.com, a birthday party planning website, suggests putting money aside every month for expenses such as birthday parties and gifts, graduations, school supplies and family vacations.
“Sometimes people forget about these one-time expenses and are surprised by them,” she says. If you tally up what you expect to pay for those expenses in a year, divide that by 12 and start putting money into an account, you might see your cash flow improve.
Put Fixed Expenses on Credit Cards
“If you’ve had problems with credit cards in the past but don’t want to give them up, only put fixed expenses on your credit cards,” says Chad Rixse, a director of financial planning and a wealth advisor at Forefront Wealth Partners in Anchorage, Alaska.
Rixse points to regular expenses such as your rent or mortgage payment, if possible, or your utilities and subscriptions, as ideal expenses to place on your credit card.
“You make these expenses regardless, so it allows you to build credit, take advantage of card perks, but not overspend and get yourself in debt,” Rixse says.
Automate Your Expenses
“Automate as much as possible,” Rixse says. “Bill payments, savings goals, etc. The more you can automate, the more consistent you’ll be, and the less stress you’ll have managing it or making payments on time.”
With that said, while setting up automatic transfers to your savings account is simple, you need to be conscientious of the financial needs for your lifestyle. For instance, if you’re often living paycheck to paycheck, an automated bill coming through your bank account when no money is there could trigger costly bank fees.
Avoid Lifestyle Creep
When you get a bonus or a raise, don’t give into the temptation to use up all of the money on products and services that give you a more affluent lifestyle. “As your income grows, don’t raise your spending to match your income. Raise your savings first,” Rixse says. Experts suggest taking half of that raise and putting it into your savings and spending the other half on discretionary purchases like a vacation.
[READ: What Is ‘Lifestyle Creep’ and Should You Try to Avoid It?]
Pare Down Your Expenses
Alex Beene, assistant coordinator and financial literacy educator for the state of Tennessee, recommends finding areas you can scale back monthly. He assists many Tennesseans in not only finding work, but also becoming more financially literate.
“I usually advise workers to look over their expenses for the month and pick three things they could live without. It may be a subscription they didn’t use, a meal they didn’t enjoy or a night out that wasn’t worth it. Eliminate that spend in your budget for the next pay period and save those funds instead,” Beene says. “By looking back at your expenses, you get a better grip on exactly where all your money is going, and by doing so regularly, you can decide what charges can be cut and saved in the future.”
Look for Financial Waste
This habit pairs well with “lifestyle creep” and paring down expenses, but it’s just different enough to give it its own category.
Lindsay Bryan-Podvin is a financial therapist in Ann Arbor, Michigan. She points out that we all waste money with unused subscriptions and that some bills, such as cable or phone bills, can be negotiated down. She also recommends thinking about your grocery bill.
“Look at what food you toss or compost at the end of the week to see where you might be over-buying,” Bryan-Podvin says. “For example, maybe you always end up with soggy produce that you mean to use for a salad at the end of each week, or you over-buy meat and end up tossing it.”
[READ: How Much Should I Spend on Groceries?]
Create Guardrails for Your Splurging
You’re going to buy some needless stuff every week or month. Everybody does it. Bryan-Podvin, however, says that you can minimize the financial damage you do if you plan to splurge — and plan in a disciplined way.
“Give yourself permission to splurge, with limitations,” Bryan-Podvin says. “Rather than say, ‘Stop shopping,’ or ‘Stop spending,’ I recommend clients give themselves a ‘fun money’ pre-loaded debit card or cash card. For example, at the beginning of each month, a person can load $100 onto it, and then if something pops up that they want to buy, they can give themselves permission as long as there are funds on the card. It allows people to have some autonomy and spontaneity without accidentally over-spending.”
Track Your Net Worth
Knowing your net worth, or the amount of money you have once you subtract all of your debts, is an important step toward reaching your long-term financial goals.
“This is the one number that best illustrates your whole financial situation. You can easily do it in a spreadsheet, with any number of apps or through a financial planner,” says Zach Ashburn, president of Reach Strategic Wealth, a financial planning firm in Winston-Salem, North Carolina. If you monitor your net worth, you’ll start to identity month-over-month and year-over-year trends to evaluate if it’s going up or down.
Keep a Money Diary
If you have bad money habits and want to improve them, this can be a clever way to make smarter financial choices, according to Alex Caswell, a wealth planner at RHS Financial, a financial planning firm in San Francisco. “In order to get good habits that develop over a lifetime, it is important to take the emotional aspect out of one’s financial decisions,” Caswell says.
Aside from brushing up on personal finance basics, he recommends starting a “money diary, to help one reflect on what decision they made and why.” By taking this simple step, you can start to make more rational financial choices.
Do a Financial Cleanse
That is, try to take a period where you either spend nothing, or nothing except your regular bills. (Doing a financial cleanse and allowing a credit card bill or mortgage payment to go unpaid would be pretty nuts.)
“Implementing a self-imposed, ‘no-spend’ period is the equivalent of putting your spending on an elimination diet to see what you can truly live without,” says Mary Hines Droesch, head of consumer and small business products at Bank of America.
“This strategy can help you balance out previous overspending and serve as a mental reset before you receive your next paycheck,” Droesch says.
Revisit Your Financial Goals
Do you find yourself only making financial resolutions at the beginning of the year — and then not thinking about them for 12 months? You really should be thinking about your financial goals more frequently. That could be once a month or twice a year, but you should look at your financial goals more often, Droesch says.
“Because today’s dollar no longer buys nearly as much as it did just a few years ago, it’s important to revisit your financial goals and adjust your expectations to today’s economic realities,” Droesch says. “This may mean taking an honest look at how much you’re contributing to your 401(K) or adjusting your saving timeline to account for the potential increased cost of your goals.”
More from U.S. News
How to Automate Your Savings — And Why It’s a Good Idea
Ways to Live Green on a Budget
Most Common Budgeting Mistakes (and How to Fix Them)
Money Habits to Start Right Now originally appeared on usnews.com
Update 05/17/23: This story was previously published at an earlier date and has been updated with new information.
