Create good financial habits before it’s too late

Financial concerns are very common, and this type of stress can often be avoided when good financial habits are in place. While there isn’t any ‘perfect’ time to implement good financial habits, the general rule of thumb is that the earlier they’re in place, the better.

Here we run through a number of small changes that you could make to improve your financial situation. These changes can help you spend money only on what’s needed, and help you establish a healthy relationship with your own finances.

Monitor recurring charges

In this day and age, subscription charges are becoming more and more common. One of the most prevalent subscription charges we see is automatically renewing payments on digital platforms. This can be in the form of a content streaming program like Netflix, or an app that automatically debits money from your account each month in order to keep the subscription.

Too often these subscriptions are forgotten about, and the money continues to be debited even when they’re not being used. To ensure that you’re not being hit with automatic renewal charges that you’ve forgotten about, run through your monthly bank statement and keep an eye out for any charges that occur once a month. Once you’ve established what subscriptions you have, go through and check which ones you really want and use.

Organise automatic savings

Almost every financially successful person will have some form of savings. However, parting with your hard earned money and putting it aside each month can be stressful when you have bills to pay. 

To avoid this, you can arrange for a direct debit of a certain amount of your money to be transferred into another account on the day you’re paid. This will help you avoid feeling as though the money is available to be spent, only to have it deducted later down the line.

Some employers have the option to have a certain amount of savings deducted from your salary, and automatically put into a savings account. If this is something you’re interested in doing, you should ask your employer if it’s possible.

Pay more than the minimum on your credit card

Credit cards can be financially stressful, and when payments aren’t met you can get hit with high fees and charges. However, this doesn’t mean that you should only pay the minimum amount.

To become financially stable you should be paying chunks of money off your credit cards with the intention of paying off the entire balance. To do this, you’ll need to pay more than the minimum amount each month. If you’re not sure exactly how much more you should pay off per month, a good rule of thumb is to add 20% to the minimum repayment amount, and make that your unofficial repayment amount per month. 

Reassess your emergency fund periodically

The importance of an emergency fund cannot be stressed enough. Almost everyone has, or will, find themselves in a situation where they need money to cover a cost that they didn’t anticipate. And, this is exactly what an emergency fund is for.

However, the amount you needed in your emergency fund five years ago is probably different to the amount you need now. This is why you should periodically analyse your expenditure and see what costs you incur each month. You can use this data to determine how much you need in your emergency fund.

We’d recommend calculating your monthly expenditure, and working to have an emergency fund that can cover three months of your costs, should a situation arise where you no longer have an income. You should recalculate this amount every six months.

Implement a waiting period for big purchases

Large, spontaneous purchases are generally made by people with less than perfect financial habits. This doesn’t mean that big ticket items should never be bought, it just means that they should be planned out. 

To help you determine whether you’ll use a big ticket item, and if it is a good idea, you can implement a waiting period. This means that if you find an item you want, then you can give yourself a certain period of time before purchasing it. If you still want the item once this time is up, it probably means you really want it and will use it a lot.

The waiting period is up to you. As a rule of thumb, many people use a 24 hour waiting period for small items ($100-$500), and a 72 hour waiting period for larger items that cost over a specific amount.