8 Good money habits to adopt

The key to balancing your money is recognizing the difference between the wants and the needs. Here are a few money habits that we can keep more of our money.

1

Try healthier lifestyle

Your lifestyle and habits impact your wallet in many ways. Try healthier lifestyle. It could be as simple as choosing to cycle or walk to work rather than pay for transportation. Or change the way you spend time with friends or family – instead of paying to eat at a restaurant or for a trip to the movie theatre, you can sign up for outdoor activities that everyone can enjoy.

2

Pay with cash

Ah, those magic plastic cards that make it all too easy to buy that luxury handbag you’ve been dying to have. Racking up credit card debt is one of the most expensive bad money habits you can have. Swiping your credit card might feel nice because you don’t have to pay for anything at first. But when all these purchases add up and it’s time to pay, you do not have the funds to pay. So, you decide to pay the minimum amount, and thus begins the cycle of debt and interest that can be difficult to get out of.

What is the best way to track your money and how much you can spend? Spend with cash whenever possible. If you don’t have a good way of tracking your spending and your credit card payments, having a fixed amount of cash in your wallet can help you determine if you’re spending too much.

3

Spend less than you earn

One of the best money habits you can develop is to live below your means. Living below your means can help you build your savings account faster and help you learn your needs vs. your wants to prevent bad spending habits. A simple but effective practice when it comes to money is spending less than you earn. For every paycheck or any form of income you receive, save a portion of it, and track your spending. By spending less than you earn, these things can happen:

• You free up money for paying existing debts.
• You can begin a savings account from the money you did not spend;
• You can save up and invest for future expenses.

Living a frugal lifestyle may seem challenging, but you’d be surprised how much money you will save by even small lifestyle adjustments.

4

Set a weekly “money moment”

This might seem obvious but how often and how closely are you really looking at what you’re spending vs. what you’re earning? Setting aside a weekly “money moment” to review your spending will help you find opportunities to keep more of your cash.

• Review your bank statements: When you analyze your expenses, you will start to see patterns in your spending habits and learn where you can cut unnecessary costs that can add up big time. Also, bank account fraud is abundant, and reviewing your bank statements can help you catch unauthorized transactions quickly.
• Track your expenses: Balancing a checkbook may seem to be a thing of the past but it’s crucial that you track your expenses even though you may not write checks anymore.
• Pay your bills early: It’s easy to slip up and pay bills late here and there, but late fees add up and are a waste of money. Do yourself a favor, and rather than paying your bills on the due date, pay them early. This will prevent you from forgetting and racking up late fees. Make it a goal to pay a bill as soon as you get it.

5

Try to implement 50-30-20 rule

The rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must-have or must-do. The remaining half should be split up between 20% savings and debt repayment and 30% to everything else that you might want. The rule is a template that is intended to help individuals manage their money and save for emergencies and retirement.

6

Keep credit card use to 30%

One of the most important things to do when building good money habits is to pay off your debt. Debt is not only expensive but has damaging emotional effects. According to some financial experts, the ideal credit usage ratio should be less than 30%. Think of your credit usage ratio this way: how much credit card debt you have versus how much you can have. In Canada, where a national credit score system is in place, a 30-percent ratio suggests that you are not being financially responsible, and are making purchases that you may not be able to afford and pay back in full. Should you decide to open a second credit card or take out a loan, this may reflect on your application.

7

Pay yourself first – be “tax smart”

We all must pay our fair share for the services that we all enjoy but there are a few ways to avoid spending too much of your hard-earned dollars on taxes. The most common way is to put as much money as you can into an RRSP every year. This reduces your taxable income, bringing you down to a lower tax bracket. So, instead of paying more money in taxes, you are simply moving it to another bank account and saving for your future at the same time. This creates a safety net for you and your family and will help you save more funds for the future. It can also come in handy if you need to withdraw emergency funds during a period of unemployment or you are looking for a down-payment on your first family home

8

Open a Tax Free Savings Account

If you’re thinking much further ahead and how to help your family keep more of their money, then a Tax Free Savings Account (TFSA) could be a smart move. Ensure you name your successor holder on the account which is different than your beneficiary. The reasoning behind this is when you die, the money passed on to your spouse can be transferred into their own TFSA without having it cashed out and taxed which could possibly put your spouse in a higher tax bracket. Divert savings into your and your family’s pockets with these types of accounts. It’s a win now, win later strategy.

These are just a few ways to help you keep more of your money. There’s no doubt you can adapt smart financial habits like these so what are you waiting for? Start becoming your own personal finance trainer!