Updated July 2024:
When I began this blog to help others improve their finances, the research I did lead me to some scary statistics about our society when talking about money.
Here are some of the main ones that shocked me the most:
- 61% of Americans don’t even have enough savings to cover a $1,000 emergency
- The average household in America has over $6,000 in revolving balances in credit card debt
- 45.5% of Americans are not saving for retirement.
- Between 50%-78% of Americans are living paycheck to paycheck
Needless to say, many of these money habits could use some improvement. Now I don’t want to give the impression that I am on my high horse and I’ve never made these mistakes.
In fact, it’s quite the opposite. As much as I’d like to say I’ve been perfect with money, that’s just not the case.
I’ve had a rough journey with credit card debt, back taxes, student loans, car repossessions, living paycheck to paycheck, overspending, and almost getting evicted from my apartment.
But the light at the end of the tunnel is that I was able to turn it around and turn it around rather quickly.
It wasn’t a quantum leap but gradually my finances improved because I started to change the way I thought about money and ultimately, my habits. These are my 8 Good Money Habits That Can Change Your Life Forever.
They definitely changed mine!
Finance Disclaimer
Remember that this is just my financial journey and should not be taken as personal financial advice. I am not a financial advisor. This information is for educational purposes only. Any choices that you make are ultimately your responsibility and yours only. I’m not responsible for any losses or gains that you achieve by reading this article and using information from it.
1. Change To A Solution Mindset
Before we talk about different action-based solutions that you can take to improve your money habits, we need to talk about the most important aspect of money, in my opinion: our mindset.
If one is focused too much on the problems they’re encountering on a daily basis, it is unlikely that they will find the solution.
For example, If you say “I want more money because I don’t have enough money to pay my bills” you’re actually focusing on the lack of money.
But If you say, “I want more money because I am looking forward to having more fun and freedom with it”, then you’re focusing on getting more money.
Remember that these are just words and it’s all about how you feel. If you’re scared and worried about money, you have to find a way of changing that to positive expectations if you want to make any substantial change.
I was able to do this successfully a few years ago.
When I lost my job due to COVID, the predictable fearful reaction was “I really need to get another job because I’m losing a big part of my income.”
But then I listened to my emotions and said “That thought didn’t feel good. So what’s the opposite of this thought?”
Then I realized, “This is an opportunity for me to go full-time as a blogger and entrepreneur”
I then started focusing on the positive aspects and the solutions in my life. I could now work full-time on my dream. I didn’t have to deal with my boss or drama with my employees.
I wanted to leave my job for a while and the universe gave me the push I needed to embrace success. Once I started to change my thoughts from fearful to ones of excitement, everything changed.
Things continue to improve in my life financially as my net worth continues to grow. I went from being heavily in debt to a net worth of nearly $60,000 in a few short years.
The point of this story is while the action is important, feeling abundant and prosperous will yield you much better results than action alone.
2. Create A Monthly Budget
When I began my financial Improvement Journey about 8 years ago, I was doing a lot of research on different tips from Financial experts online.
The number one tip that they gave was to create a monthly budget.
This made a lot of sense to me because I was living paycheck-to-paycheck for basically my entire adult life.
I knew how much money was coming in, but I never really looked at how much money was going out. I created an online spreadsheet that tracks all of my expenses and income.
When doing your own budget, you want to make sure that your expenses are not higher than your income. This alone will help a large majority of people improve their overall financial situation.
I was able to see everything in front of me which helped me to make some substantial improvements that gave me positive momentum forward.
I was able to cancel subscriptions, find cheaper auto insurance, lower the interest rates on my credit cards, and most importantly, save on groceries and eating out.
You can create your own excel spreadsheet, use a pen and paper, or check out the free Budget templates I use at Vertex 42 here.
3. Start An Emergency Fund
As I stated in my statistic earlier, 61% of Americans don’t even have $1,000 to cover an emergency.
So when an emergency does come up, they either have to put it on credit card debt or borrow from friends or family.
I like to focus more on the positive, but let’s face it… life happens!
Sometimes our car breaks down, someone has to go to the hospital, or some other expense comes up that we just don’t anticipate.
The way I started my emergency fund was by putting a portion of my paycheck every month into a high-yield savings account.
It is important to use a high-yield savings account because you want to be able to get the highest return on your money versus just having cash sitting in your home.
One of the best high-yield savings account that I found online is through SoFi Bank. I use them currently for my emergency fund accounts and other savings accounts because a very competitive wage.
If you use my referral link, you’ll get a bonus of $50 to $300 when you set up direct deposit. Try to save $1000 first, then 1 month, 3 months, and end with 6 months of saved expenses. That way, if you do have some type of emergency (loss of job, car repair, medical expense), you’ll be set.
4. Pay Off High-Interest Debt
The next money habit that was substantial for me was paying off my high-interest debt. I had student loans in my 20s but I had paid them off almost immediately after college.
However, I did get myself into trouble with credit card debt and high-Interest auto loans.
First, if you do have high-interest credit card debt, I recommend that you call your credit card companies and ask if they can lower your interest rates because you’re trying to improve your financial situation.
I did this several times when paying off my cards and they lowered my rate by over 5% per card which helped me pay off the cards faster.
Just remember that you can’t use those credit cards anymore because that will just slow down the process.
I used a technique called the debt avalanche method to pay off all my credit card debt while paying the least amount of interest. If you turn it into a game and not something you dread every month, the process will not only go faster, but be a lot more enjoyable for you.
5. Get Paid To Use Credit Cards
After I paid off all of my credit card debt, I started looking at different ways to improve my finances. One of the techniques that I learned was something called credit card hacking.
By using credit cards for your regular monthly expenses, you will get cashback and other travel perks just by paying your bills on time.
This does take some willpower especially if you had issues with credit card debt in the past. But if you can overcome this you will gain a lot of benefits.
The side benefit of doing this is that it will improve your credit score. Having a great credit score is essential especially if you’re going to get a mortgage to invest in real estate.
When starting out, make sure that you get a credit card that has cashback benefits and a zero annual fee.
These are the two credit cards that I used starting out to start credit card hacking and rebuilding my credit.
- Discover Cash Back (Click the referral link to sign up)
- Capital One Venture Travel (Click the referral link to sign up)
Now that my wife and I both have excellent credit scores, we use the American Express Platinum Card and Hilton Honors Card to get travel benefits.
We also recently added an American Express Blue Cash Back Business Card for business expenses.
- Hilton Honors (Click the referral link to sign up)
- American Express Platinum (Click the referral link to sign up)
- American Express Blue Cash Business (Click the referral link to sign up)
6. Invest To Build Wealth
The next money habit that I implemented was to invest to build wealth.
My investing journey started back in 2007. My aunt had been buying savings bonds for me since I was a child and when she passed away, I received those funds.
And boy did those burn a hole in my pocket!
While I did pay for bills and other expenses with that money, most of it was for performance car parts, eating out, and other frivolous items. In less than six months, almost $40,000 was gone.
In hindsight, I should have kept at least some of that money invested. We all make mistakes though and there is no point in beating myself up.
But because I had blown that money so fast, it made me really appreciate it when I started investing again.
Moving forward to 2016, I learned that my employer did something called an employer match 401k contribution.
This means that when I contributed 4% of my pre-tax earnings, they would match 2% into my account. While I didn’t like that my paycheck was being reduced at first, the idea of receiving free money quickly changed my mind.
I then raised my contributions to 10% of my total pre-tax income. When I left that job in 2020, I rolled over that 401k into an individual retirement account(IRA).
I’ve been investing the maximum contribution pre-tax limit of $6,000 per year and I also contribute another $6,000 to my regular individual investment account.
I now also invest in Gold and Silver bullion. To find out more about investing in precious metals, check out my other article on gold and silver investing for beginners.
This money habit has been one of the most life-changing lessons because it taught me that my money can grow.
It’s also a lot of fun!
Just make sure you don’t get too caught up in the ups and downs of the stock market and other Investments. My next investment is going to be into real estate when I find the right opportunity.
7. Build Multiple Streams Of Income
There’s a certain point where you can only do so much with the money that you’re currently making. At that point, you’re going to have to make more money.
You could certainly ask for a raise at your job, but that tends to yield small results in my opinion. I would have to really push and sell why I should get a raise almost every year at my previous jobs.
Remember that many employers are trying to get the most out of their employees at the lowest cost.
The solution to this is to create multiple streams of income. Believe it or not, this is much easier than ever before due to the internet.
Here are the few streams of income that my wife and I currently have:
- Employment Income
- Income from 2 Blogs
- eBay store sales
- Dividend Investing Income
- Credit Card Cash Back and Rewards
8. Give Back To The Community
The last money habit on this list might seem a bit contradictory. After all, why should you give back money to the community if you’re trying to build wealth?
This actually ties back more to an abundant money mindset. If you’re able to give back to the community, that shows that you have enough to give and the Universe will reward you with more money.
And on top of that, it is quite satisfying to give back, especially to those who are less fortunate than you.
Giving back to the community can be done in multiple ways. It’s not just about giving money to the homeless or that type of thing.
Here are a few ways that I give back to the community that helps:
- Giving a nice tip at a restaurant.
- Donating my cans to someone instead of recycling them myself
- Buying a meal for a homeless person
- Cooking a meal at a community center
- Volunteering at a local Mission or Church
I think it is so important to give back, but I also think that you need to take care of yourself first before you can really take care of anyone else. Airlines offer a great example of this.
When they give the instructions before take-off, they say “In an emergency, oxygen masks will drop down. Please put your own oxygen mask on first before helping others.”
My point here is that when you are financially well off, it opens the door to so many more opportunities for you to improve the world. But you have to take care of yourself first.
Thanks for reading,
Nick Hazleton