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5 Money Habits to Avoid Financial Stress

by dollarwise
avoid financial stress

Here’s 5 wise money habits that’ll help you avoid financial stress. Perhaps you’ve noticed that some people are always short of money, while others are never phased? Chances are they’re living out these habits. And here’s an important point, it has nothing to do with income. Some big income earners find themselves in financial difficulty and there are some really low income earners who cover their bills without any worries. Sure, more income helps, but these habits will serve anyone. The goal here is to be worry free. There’s nothing worse than not knowing how you’re going to pay the next bill. So here’s the wise money habits.

1.Track Your Spending (and earning)

If you don’t know where your money is going, is it any surprise you find that it’s going out the door quicker than it’s coming in? Now there are apps and software that can tap into your bank account and do this for you. Most banks these days have their own expense tracking software too, though some are pretty crude. Or you could use an app like home budget (iOS, Android – this is the one I use because of the family sync feature -$7.99 one off) or mint (best in US/Canada iOS, Android) or Spendee (iOS, Android) to input your expenses as they happen. There are plenty more too that you can find. Once you’re tracking your expenses and have done it for a while, there are few surprises. You can see exactly where you are over spending or where you need to cut back. Information gives you the power to say no to some things and yes to others. If you track your spending you are far more likely to save, to spend less than you earn or get hit with a bill you can’t pay. This is probably the single most powerful habit you can adopt to enable you to avoid financial stress. So start tracking!

2. It’s the B word.

This is the other side of tracking your spending, that is deciding beforehand how much you will spend and how much you will save. We call that a budget. See, you live in culture that is designed to free money from your wallets. Every advertising campaign, every shop, every magazine, it’s all wanting to get as much of your hard earned income as possible. If you decide on a whim, on a feeling, in the moment, chances are you will overspend. You are at the whim of the marketers plans. Either you decide what you will spend on or someone else will gladly decide for you. Which will it be? Surely you alone know what’s best for you and your family. So do up a budget and decide for yourself with a cool head exactly how you want to spend your income.

Here’s the nuts and bolts. Put in your fixed expenses (many of which you can reduce with some effort), then decide on your optional spending in light of your current income. There’s plenty of budgeting apps and tools out there. Here’s my-budget-spreadsheet I use if you want to take and adapt it. But know that those who always have money to spare, have it because they decided beforehand that they would. So don’t be afraid of the B word, it might just keep you out of a financial pickle.

3. Never go into debt or spend money you don’t have.

Not so much a habit as an inflexible rule of life. The financially wise chose to avoid debt like the plague. It means you save for things instead of getting it now. You buy a car for cash, probably with a few miles on the odometer to do it. You avoid credit cards or use them for points, not spending money you don’t have. Instead of the shiny new iphone, you’d rather pay upfront for a cheaper brand or older phone you can afford. Now I hear you say, what about a house? Sure, house debt is beneficial debt as the house can increase above inflation. But even here, never take out the full amount a bank will lend you. Instead, choose a more modest home with a smaller repayment that you can get ahead on very quickly and upgrade down the track. Make it your habit to not spend any money you don’t have. Make debt your worst enemy and enjoy financial peace.

4. Shop Around. 

If you make the effort to find the best price for a quality product or service you will very rarely end up in financial distress. The habit of spending less is a powerful one that makes small gains in every aspect of life, over a lifetime. 10c here, $2 there, it all adds up over time. That money can now be invested and earn you money. Think of it this way, every $1 you don’t waste by overspending or paying too much for a service you could get for less, is $41 you could have in 20 years time (and that’s in today’s dollars taking into account for inflation).

With smart phones it’s a simple task to check if you can get the same item somewhere for less, or perhaps a second hand one on ebay or the like. This simple habit will add up over time. But perhaps the biggest savings can be made on your ongoing big ticket costs such as insurances, energy costs, phone and internet.

Insurance companies, energy companies, phone providers and the like, all have one thing in common. They gouge their loyal customers, while offering huge discounts to new ones. So be wise and be a new customer every year. Sure, give your existing company the option to match or better, but if not, walk away. Typically they are all providing the same or comparable services, so make it your habit to find the cheapest and most affordable option. You could use sites like iselect , compare the market , choosi, or any number of other comparison sites, but be aware that they only feature those companies that pay them commissions, not every provider. It’s a good place to start, but a good idea to look beyond what they offer too.

It’s also worth keeping an eye out for best price guarantees. They usually come with a heap of caveats and a process to remove all but the most ardent enthusiast. With some effort I’ve managed to get an additional $100 each year off my insurances and several thousand dollars off a solar install through one of these offers. They are typically worth the hassle, just make sure you read the fine print well.

5. Automate Your Savings

Work on the principle of save first and spend what’s left. The day after the paycheck comes in is the best time to hive off the minimum your going to save. You can always save more, but the smartest move is to take it out before life happens. Set up an automatic deposit into a high interest account or into your mortgage. Once it’s gone, you won’t miss it at all. And if you really have to dig it out, it will be there.

Avoiding financial stress is really not that hard. A few simple habits implemented in your life will mean you can sleep easy and know that your bills will be paid. More than that you’ll find yourself saving a nice little nest egg for the future. Now that’s wise!

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11 comments

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11 comments

ADI October 6, 2016 - 9:50 pm

I found automating my savings to have the biggest effect on my financial well being. I can’t stick to a budget to save my life and I struggle to keep track of my expenses for longer than a day, but I found that as long as I “pay myself first” the rest of the financial situation tends to fall in line.

I also do the old “call foxtel every year and threaten to quit” routine!

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dollarwise October 7, 2016 - 2:45 pm

ADI, As long as you’ve found what works for you. I’m a bit fanatical and like to know where every dollar is going! Not for everyone though. Cheers Luke.

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Dividends Down Under October 10, 2016 - 8:29 am

Luke, I like that you mentioned not having a credit card as an actual tactic. We don’t have a credit card and although I see the advantages in the earning the rewards if you always pay on time, there are negatives too. Which we don’t want. It feels much better to pay with cash/debt every time.

Tristan

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dollarwise October 12, 2016 - 4:38 pm

yep, credit cards can be a trap if you’re not careful. The key is to avoid ongoing, growing debt and if that means avoiding credit cards, you should. If you’re disciplined to pay off in full without interest, then it’s not a whole heap different to a debit card. Each person really does need to decide for themselves. Glad you’ve made the choice to avoid them. thanks for your comments Tristan.

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Mustard Seed Money October 15, 2016 - 1:51 pm

Checking out craigslist is a habit I’ve had to get into to ensure that I don’t overpay for things. Sure it’s a little more of a hassle than the one click button on Amazon. But being able to save 50% on something that’s barely been used is well worth it to me.

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dollarwise October 17, 2016 - 3:40 pm

Great suggestion. Thanks for the comment MSM.

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The Thrifty Issue November 5, 2016 - 2:36 am

Since I started tracking my expenses, my finances are handled well. I was not aware of the importance of knowing where my money goes until lately. For my earnings, I save almost 30-40% of it.

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dollarwise November 7, 2016 - 3:11 pm

That’s a great savings rate The Thrifty Issue. Tracking certainly helps with wise decision making. All the best with your thrifty ways. Luke.

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Cara @ Fashionably Frugal November 22, 2016 - 6:28 am

I bought a little notebook to keep in my purse to track all my expenses. I really watch what I buy now since I know I will have to write it down where I can look back at it and regret spending the money. Even trips to the vending machine at work make me feel guilty since I know I can buy a big bag of pretzels at the store and bring a baggie of them each day for the same price as a small bag from the machine. It really inspires me to try to be better at planning ahead when it comes to food and packing my own lunch for work.

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dollarwise December 3, 2016 - 2:44 pm

Cara,
That’s a great idea. Shows you how much it’s a matter of the mind, just thinking a bit before you spend. It can be fun to see how much you can save.

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Carina Plant January 18, 2020 - 1:27 am

Automating and tracking my savings have worked well for me and agree with your point on shopping around. But have you ever thought about using referral awards? I only say this because they have helped me a lot and I know a site if you are interested.

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