Achieving financial independence doesn’t happen overnight—it’s a journey. By changing some of the everyday decisions you make regarding money, you can create a great financial future.
Here are six habits to develop that will help you build financial success.
1. Save from every paycheck—even if it’s a small amount.
Saving is the cornerstone of financial success. If you can’t build up a savings fund over time, major financial goals, such as retirement, will continue to be out of reach.
Especially if you’re a young professional, the amount you’re able to save can seem insignificant in the moment. But these small amounts add up over time as interest accrues and compounds on itself.
Make a promise to yourself to save at least a little bit from every paycheck. If you struggle to make this contribution or tend to forget, set up automatic transfers that can do the hard work for you.
2. Set a budget, and closely track your spending.
Financially successful people know how to live on a budget, and they use that budget to control their spending and allocate extra money for savings.
But the value of a budget is maximized when you use a money management tool to track not only your monthly spending but also the actual line-by-line expenses you pay in a month. Close attention to this spending can raise awareness of your money management habits and reveal where you can trim unnecessary spending.
Whether it’s cutting back on coffee during the week or bringing home smaller receipts from your shopping outings, this awareness will teach you a lot about your spending and how you can harness a budget to reach your financial goals.
3. Enforce your budget limits on yourself.
A budget isn’t just a guideline for spending. In the best-case result, a budget functions as a hard limit to your spending, forcing you to figure out how to live within your means, even when that means making difficult choices.
There are always cases in which budget limits can’t be enforced. If you get a new job and need a new professional wardrobe, you may go over your clothing budget for that month. Similarly, car expenses can come out of nowhere and likely aren’t negotiable.
Nevertheless, take a hard-line approach to category spending limits. It will save you money and help you learn ways to manage your spending to avoid similar tight situations in the future.
4. Prioritize your debt repayment.
If you are facing significant debt, paying this down may need to be your highest priority, depending on the amount you owe and the amount of interest you’re paying.
Credit card debt can carry a high interest rate that digs your financial hole even deeper. But some types of debt, such as mortgages or some student loans, are so low that it makes sense to pay the minimum and put that money toward other goals.
Our free budgeting guide can help you determine which debts should be paid off first and which ones can wait until later without much financial consequence. If you’re primarily dealing with credit card debt, download The Definitive Guide to Paying off Credit Card Debt here.
5. When income increases, keep expenses the same.
If you earn a pay raise or accept a new job with more money, congratulations! Increasing your income is a great way to set yourself up for long-term financial success. But there’s a catch: Earning more money only helps in the long run if you can keep your expenses the same, thus allowing you to save and invest more money each month than you were previously.
Think of it as a bonus each month that can be used to fund your savings goal or pay off high-interest debt. If you can keep your lifestyle at the same level, you can build significant wealth over the course of your career.
6. Don’t be afraid to tell yourself “no.”
We’re all human, and sometimes our impulses can get the best of us. That’s not to say you can’t treat yourself on occasion! But if those expenses fall way outside your budget, practice telling yourself “no” and making decisions that prioritize your future self.
If you can learn this habit early in life, when your income may be lower, it will pay big dividends as your career progresses and your income goes up.
Financial success isn’t about simply making a certain amount of money. In most cases, financial success happens when you’ve put in the work to develop strong money habits. These habits can be a challenge to develop, but they’re a great tool in your pocket when it comes to managing money and building a better future for yourself.