There are a lot of reasons why you need to develop money-saving habits and one of the most important ones is debt payment. Debt has played a huge part in society over the last few decades. It has allowed people to reach their goals and for some, it has made life a lot more difficult. What you need to remember is that debt is just a financial tool and how you use it is totally up to you.
There are big ticket-items where a loan is the only way to get it. Take a mortgage loan for example. You can probably save up for the full price of the property but that could take you decades to put together. The money you pay in rent while saving for a house could have been used to pay down for your own property.
The same goes for student loans. If you wait until the time you can pay for your cost of attendance in full without taking out student loans, you could be missing out on employment opportunities already. This is one of the reasons why you need to have money-saving habits to allow you to take on debt now and pay it back efficiently afterward.
This is a tough habit to build up especially with how the pandemic slammed on the brakes of the economy. It would be interesting to note though that Time shared in an article that Americans are saving a record-high 32.2% of income after taxes early in the year. One reason for this upward trend could be the fact that people are trying to hold on to their income because of the health crisis. This is a good start but habits take time to form. But once it does, it can help you in a lot of ways.
Plan your purchases ahead
One of the money-saving habits you can start developing now is creating a system where you consciously plan your purchases ahead. For one, this lowers the chance of impulsive buying on your end. You do not go out or go online just for the sake of buying whatever you want. You can end up spending on things you have no use for. Planning ahead puts a purpose to your actions.
Before you go out to the mall on a weekend, have a list of the things you need to purchase. This drastically helps cut down the time you have to spend outside and risk getting the virus. It also gives you the chance to go over and review your expenses. Chances are you might be able to find alternative and lower priced items which can help you save money.
The same thing with your online activity. Before you open up online shopping sites and portals, know what you need. It is even better if you have a price cap on how much you can spend on that specific item you need. When shopping online, stick to the item you need so you do not get tempted in buying other items you do not need. Remember that when you spend on things you do not need now, the time might come that you have to sell things you need to make ends meet.
Transfer funds automatically to your savings account
Technology has its benefits and when it comes to your finances, it can definitely help you develop your money-saving habits a lot easier. The goal of habit formation is to be consistent with the action. If your starting goal is to set aside $50 every month, you can automate that process. This means setting up your account where that amount is automatically transferred out of your checking and into a saving account.
One thing this does is it builds that habit automatically. You do not even have to think about it every month. It also helps lower the chance of using that amount for unnecessary expenses. If you don’t see it in your checking account, you can not use it anymore. One thing you just have to make sure of is that the funds are in your account before the transfer happens.
Think of it as an expense you need to pay every month. Once the money leaves your account, it is gone. You are forced to save money which can be a good thing. Forbes shares that about 23% of Americans do not save any amount from their regular paychecks. Automatically transferring the amount can get you ahead of most people when it comes to saving money.
One of the money-saving habits to do is put your credit card on ice
One of the biggest reasons why a lot of people get into debt is because of the way they manage their credit cards. If you are one of those who constantly swipe your way into a luxury you cannot afford, it might be a good thing to ice your credit cards temporarily. This can help you develop money-saving habits while staying away from unnecessary expenses.
Remember that your credit cards are merely financial tools at your disposal. The way they affect your finances depends on how you use them. There are people who are successfully making use of their credit cards to improve their finances. Some people use their cards so they can manage their household budget better.
Be careful though mindlessly cutting up and discontinuing your credit cards especially the accounts you have had the longest. This is because the payment history in those cards contributes to your credit score positively. It shows lenders that you were able to use your card and pay them back as well. If you cut these cards up, you lose that payment history under your name.
Benefits of money-saving habits
Now that you have an idea of how you can start creating that habit of saving money, it also helps to look at the other benefits it gives you more than just debt payment. Here are some of them worth looking into.
Protection against financial emergency
During this health crisis, one of the things it was able to highlight was the need to have an emergency fund. This resonated with a lot of people especially when they started to find it difficult to bring in the same amount of income as before. If you are able to save money for your emergency fund, you stand a better chance of getting through a financial emergency in the future.
Better financial control in retirement
Retirement should be an exciting stage in your life. That is if you were able to prepare for it. Your level of comfort in your golden years depends on how well you saved up for it. And when it comes to retirement preparation, debt payments are a big concern. The idea is to have more control of your retirement money and use it to enjoy life, not pay off lenders. This is important as CNBC shares that about half of Americans have over $29,000 in debt under their name.
Money-saving habits can help you address and focus on debt payment especially at the start of the new year. It can also give you the upper hand in preparing for your future needs. Remember that the more consistent you start creating that habit, the more it will stick with you.