Paving the way to financial stability is not an easy task. You need to be disciplined and consistent yet flexible and open-minded. You need to build good financial habits and ditch the bad ones to help you achieve your financial goals. To help you get started, these experts shared their best financial habits for 2019.
Here are the 25 best financial habits you should start to build this year, straight from the pros.
1. Start Saving Money Weekly or Biweekly
Richard Muskus Jr., President, Patriot Bank
We are in a digital banking world, and it’s time to use that to your advantage. If your bank has an app or an online portal, consider setting up an automatic savings transfer to start saving weekly or biweekly. The best thing about setting a weekly or biweekly savings transfer is that this will become a habit, and you can align each transfer with your paycheck. Starting this financial habit will pay off in the long run. You can start off small and work your way up to saving more for your future. The important thing is that you remain disciplined and consistent.
2. Start Building Your Emergency Fund
Charisse Mackenzie, President, Saturn Wealth
This year, you should discipline yourself and start building that emergency fund. It’s best to have a nest egg of at least six months’ worth of expenses. That way, if something unforeseen comes up, you have the money to cover the cost and don’t have to use your credit card or take a loan for it. Build your emergency fund and avoid going into debt in case of unexpected events.
3. Start to Work With a Fiduciary Financial Adviser
Michael Tanney, Co-founder & Managing Director, Wanderlust Wealth Management
Many people make the mistake of waiting until they have substantial assets and then look for investment help. Laying out an early road map for success will produce exponentially better results later. This year, if you haven’t already, start to work with a fiduciary-only adviser, one who is legally obligated to work in your best interest. A fiduciary-only adviser removes all conflicts of interest and always sits on your side of the table.
4. Stop Relying on Credit Cards
Kevin Gallegos, Senior Vice President of New Client Enrollment & Phoenix Operations, Freedom Debt Relief
This year, stop relying on credit cards and carrying credit card debt. Paying down credit card debt at today’s credit card interest rates effectively means a return of 16% to 20%. Few, if any, investments will return as much. Also, having no credit card debt provides a financial cushion in itself. To wean off the credit cards, commit to not touching the plastic for discretionary expenses like clothing, movies, coffee, dining out, or happy hour. People who do not use credit cards are less likely to throw that extra item into the shopping cart or make an extra purchase ― and generally, they spend 15% less.
5. Set Up Automatic Transfers to Your Savings Account
Marc Andre, Personal Finance Blogger, Vital Dollar
One of the best ways to make sure that you save money is to set up automated transfers from your payroll or checking account to your savings account. You could set up a monthly transfer or set it up to transfer right after you receive your paycheck. It takes just a few minutes to set up with your bank, and it will make sure that you’re saving and not forgetting to set money aside on a regular basis.
6. Get Organized to Make Tax Season Less Stressful
Josh Zimmelman, Owner, Westwood Tax & Consulting
If you found the previous year’s tax season to be a stressful time, then you should get ahead for the new year. Whether you want to deal with paper or go totally digital, make sure you work out an organization system that works for you. You’ll need to keep track your income and expenses but might also need to set up a phone log or mileage log depending on how you do business. If you make an effort to stick to your system at the beginning of the year, then you won’t have to stress next April looking for receipts and pay stubs. Also, make sure you save your previous year’s tax return somewhere safe. You might need to refer back to it when preparing your return for next year.
7. Monitor Your Credit Score & Credit Report Quarterly
Alissa Todd, Wealth Adviser, The Wealth Consulting Group
Your credit score is a number that lenders use to help them decide how likely it is that they will be repaid on time if they give you a loan or credit card. Your credit score is used to assess the risk that you represent to a lender. Monitoring your credit on a regular basis will help you catch any error or fraudulent activity on your credit, thus preventing potential identity theft. As a consumer, you are entitled to one free credit file disclosure from the three bureaus ― Equifax, TransUnion, and Experian ― every 12 months. You can pay to receive your score there too, or you can get your score through your credit card provider.
8. Institute a 24-hour Rule for Major Purchases
George Krueger, Co-founder, BIGG Success
If you need to make major purchases, give yourself time to think it through by following a 24-hour rule. For example, you’re shopping for a new TV. You know what you can afford, but the one you want is out of your range. You get excited and emotions take over. As luck would have it, you qualify for special financing. You justify it as just a small hit to your budget every month for two years. The merchant doesn’t have to sell you ― you sell yourself. You can avoid this situation by taking 24 hours before making a major purchase, to give yourself time for logic to return. The best financial decisions are driven by logic, not emotion.
9. Never Invest More Than You Can Afford to Lose
Robert Grosshandler, CEO & Founder, iConsumer
Set out part of your budget for investments and never invest more than you can afford to lose. If you don’t take risks, you’ll never learn anything new. That goes double for investing. Where you are in life helps to dictate how much you can afford to lose. If you’re nearing retirement, and you need the money to retire on, risky investments aren’t for you. However, if you’re in your 30s, you have plenty of time to recover from making an investment that doesn’t work out. If you losing your investment means you can’t pay your landlord, that’s too much. If losing your investment means you don’t go on another fancy vacation, that’s probably OK.
10. Change the Way You Look at Your Earnings
Jason Campbell, Owner, J. Campbell & Associates Ltd.
The easiest thing you can do is change the way you think about the cheque or deposit coming in from work or business earnings on payday. This is a fairly well-known yet little followed psychological tactic. When you get a check from somewhere, you can’t see it as the actual amount in full. It’s best to physically and emotionally divide that amount by your expenses and investments. If you’re feeling the pressure of debt or retirement savings, you can setup auto-withdrawals or payment schedules with your bank to guarantee that the cheque gets divided among your financial obligations. That way, you don’t get stuck in the reward mindset, which enables you to run off and spend it on yourself or nonessential purchases. It simply isn’t a lump-sum reward.
11. Start Using Business Credit Cards for Business Transactions
Sean Messier, Credit Industry Analyst, Credit Card Insider
One habit that businesses can develop to improve your financial state in 2019 is to master the use of business credit cards to help stimulate long-term savings and build great business credit. If you haven’t done so yet, start using business credit cards for business transactions. These cards not only help keep work and personal finances separate, but they’re developed precisely with businesses in mind, often offering rewards programs that can help you rack up significant savings on the purchases your business is already making.
12. Save 10% More Per Paycheck Than Last Year
Ashvin Chheda, ChFC, CLU, Registered Representative, Guardian
Commit to saving at least 10% more per paycheck than last year. Initially, consider sweeping this money from your regular bank account to another account so that you won’t spend it. Open this with an online bank that gives a good interest rate on a savings account and has FDIC [Federal Deposit Insurance Corporation] protection. Not only will this ensure you have an emergency bucket for at least six months of living expenses, but you’ll also get into the habit of saving.
13. Make Extra Payments on Your Mortgage
John Myers, Owner & Real Estate Broker, Myers & Myers Real Estate
Make 2019 the year you start making extra payments on your mortgage. Most mortgages allow you to pay down your principal with no penalty. Send a separate check or separate electronic payment and tell your lender the additional payment is for principal reduction. It will take time to pay off your mortgage. However, living mortgage-free or rent-free is life-changing. If you don’t own a home, make 2019 the year you start saving money for your down payment and closing costs to purchase one.
14. Start Using Manual or Online Budgeting Tools
Beverly Harzog, Consumer Finance Analyst & Credit Card Expert, U.S. News & World Report
It’s great to set spending and saving goals, but you aren’t likely to make them a reality unless you have a budget in place and system for tracking expenses. Review your budget often so you can make changes when your cash flow goes up or down. There are tons of apps and online budgeting tools to help you stay on track. If you’re struggling with this, don’t forget about the old-fashioned envelope method. It’s had staying power all these years because it works. Set aside envelopes for your income, your expenses, and your savings. For example, you decide how much you can spend each month on groceries. You put that amount in the envelope, and that’s all you can spend on groceries. It makes you plan ahead and teaches you to stick to a budget that also allows you to save money.
15. Talk With Your Family About Money Matters Regularly
Kathy Longo, Founder & President, Flourish Wealth Management
Conversations with family can include discussing financial goals for the family, allowances for the new year, potential one-time purchases like a vacation or major home improvement that is being saved for. It can also include plans to pay down debt. Make sure everyone, including the children, has space to ask questions and be honest. Money values differ, even within one family, so the more open the dialogue, the better. Money talks teach your family how to be open and responsible with finances, and that is a gift that can carry down for many generations.
16. Assess Your Risks & Manage Them Carefully
Rick Kollauf, Director of Business Advisory, BMO Wealth Management
Most of us insure our property, potential liabilities, and health. Few insure for acts that might leave us personally disabled and unable to generate income. Even fewer, insure for business issues that could otherwise impact the ability of the business to generate income, such as another key person leaving for another job. Assessing all the risks within both your business and personal life that could impact your financial health should be a habit developed that will leave you in a more secure position. Assessing is the first step. Insurance can be a solution, or self-funding may be the answer. In any event, planning for the risks and how to manage them is important to protect what you have to build.
17. Minimize or Stop Buying Expensive Coffee & Eating Out
Craig Kirsner, Owner, Stuart Planning
Skip the expensive coffee and eating lunch out every day. If you do this and save $20 per workday, 260 work days a year, it means you can save $5,200 per year. If you’re in the 20% income tax bracket, that’s like getting a $6,500 per year raise. You can put these extra savings on your emergency funds or your retirement funds.
18. Start Doing Your Taxes Monthly
Eileen Roth, Owner, Everything in its Place
Tax season can be very stressful for most people. However, if you plan ahead and start doing your taxes on a monthly basis, it will make it easier for you to compile them at the end of the year. This year, don’t wait until tax time to do your taxes. Start a monthly tax habit to make the next tax season less stressful.
19. Plan Ahead for Your Major Expenses
Byron T. Deese, Retirement Consultant, Glass Jacobson Financial Group
If you fail to plan, you plan to fail, so take the necessary time to map out your financial future. Planning is a core element on your journey to financial mastery. If you are expecting major expenses, such as events like wedding, your child’s college, or a vacation, you should plan for these expenses ahead of time to ensure you have the money to finance them.
20. Start Using a Shopping List When You Shop
Sara Skirboll, Shopping & Trends Expert, RetailMeNot
One of the worst things you can do to yourself financially is shop without a list. If you’re not thinking through your purchases, and this includes everything from your beauty products to your regular expenses like groceries. You’re more likely to find yourself buying more than you intend to, which is an easy way to spend more and get into financial trouble. Make your list beforehand and do the due diligence on your purchases, whether it’s for a new outfit or your regular household supplies, to ensure you’re not spending more than you have to.
21. Plan Your 401(k) Contributions
Tom Conlon, Head of Client Services, Betterment for Business
It’s better if you’ve been maxing out your 401(k) contributions throughout the previous year because you stand to gain quite a bit more. However, the beginning of the year is a great time to begin thinking about what you can contribute in 2019. Even bumping up your savings rate by 1% can add up in years to come.
22. Set Incentives for Sticking to Your Goals
Pamela Yellen, Founder, Bank On Yourself
Studies show that people who make resolutions are 10 times more likely to achieve their goals than people who don’t. Understand that real, permanent change is usually driven by your own desire, rather than outside pressure. To help achieve your goals, make it a habit to set incentives and consequences. Websites like stickK.com allow you to give yourself incentives for sticking to your commitments and set up penalties for breaking them. When you make your commitment binding, you increase your chances of success. Plus it’s fun to reward yourself when you reach a goal.
23. Cut the Grocery Bill
Willie Anderson, Private Client Insurance Adviser & Founder, Life Solutions
Food for your household can often be one of the biggest monthly expenses. You can help cut your food costs by meal planning, buying what’s on sale, using coupons strategically, and shopping at farmers’ markets. Try to steer clear from premade foods and convenience frozen items. The least expensive way to buy food is often to purchase whole food items in bulk. Make sure that if and when you fall under budget for groceries, you’re saving that leftover money. If this becomes a trend, try cutting your grocery budget by the average amount you’re falling under each month and officially allocating the surplus to your savings.
24. Read at Least One Financial Book per Year
Jacob Dayan, CEO & Co-founder, Finance Pal
This year is the best time to increase your knowledge and get educated about attaining financial freedom. There are thousands of great books filled with great financial advice. Do yourself a favor and read at least one per year. Think of it as an investment in yourself.
25. Review Your Insurance Needs Annually
Denise J. Nostrom, ChFC, CLU, Owner & Financial Adviser, Diversified Financial Solutions
Make it a habit to review your insurance needs annually as they change as you grow older. Having adequate protection is the key to a successful financial plan. Check to make sure you have adequate coverage for life insurance, health insurance, disability insurance, homeowner’s insurance, business insurance, and long-term care. Having sufficient coverage will minimize the effects of some financial setbacks you may encounter.
The Bottom Line
For most of us, the new year is a great opportunity to start new habits that will help achieve our financial goals. The road to financial freedom may be challenging. However, with self-discipline and making little sacrifices now and then, it is not impossible to attain. If you’re trying to build good habits this year, make sure to include the best financial habits listed above.