FIRE,  Life

15 Personal Finance Habits Everyone Should Follow

Reading Time: 3 Minutes

Howdy all!

Recently I received a question from a loyal reader named JD regarding a cheat-sheet of personal finance habits everyone can follow.

Good money habits start with keeping what you’ve earnt, which leaves more $$$ left-over for investing!

Here’s a quick list, enjoy!

1. The most basic one, is to start paying better attention to your finances. MrsFrugalSamurai has come leaps and bounds with her personal finance habits since our dating days. Back then… well at the risk of a frypan to my face, let’s just say it wasn’t… ideal. But now, she’s turned into a money whizz! Keeping track of her expenses ensures she has visibility on her spending.

Frying Pan Tangled GIFs | Tenor
Her aim is deadly.

2. Budget. Shock horror but I must admit, we don’t really have a budget in our household… Mainly because growing up in austerity, I kinda have a mental map of where every dollar is going to. If you’re not like me of course, please, please, please… create a budget. Break down your income into percentages and figure out each allocation e.g. 30% housing/mortgage/rent, 40% necessities e.g. groceries, utilities, transportation, 20% personal and lifestyle, 10% saving etc.

3. Financial goals. Every ship needs a direction! It’s up to you to navigate that course. Keep your goals SMART (specific, measureable, attainable, realistic and timely). For example, $1m in savings at age 50.

4. Track net worth. This one’s a bit controversial, because it forces you to take accountability. And people don’t like being accountable to themselves. But I find keeping track of your net worth keeps you on track with your financial goals… if you’re serious about them.

5. Payoff debts. I don’t think anyone truly “loves” debt. It’s important to distinguish good (which generates income) and bad debt (which generates expenses). Regardless you are still paying interest on that debt. Have a look at your current debt levels, and pay off the bad ones first. A lot of people tackle the smallest debt initially, to get that sense of accomplishment.

Snowball Rolling Downhill GIFs | Tenor
It’s called the “Snowball Effect”.

6. Mortgage interest rates. This is probably the most impactful hit to the bottom line we DON’T pay attention to. It’s also the easiest to fix. A difference of 0.5% to a $500,000 mortgage over 30 years at current rates can be over $50k. If you take one thing from reading this post, this is the lowest hanging fruit. Call your bank and ask for a discount, you’ll be surprised at how willing they are to keep your business.

7. Never pay retail. This is one of my favourites. Never pay retail for items which are non-perishable. I don’t mean to hoard (like toilet paper), but for household items which you’ll always be using but don’t have a short-term expiry date e.g. shampoo and conditioner or cleaning products.

8. Never impulse buy. Similarly, don’t be swayed by those snacks and choccies by the counter, they are placed there deliberately to get ya. Mind you, the occasional Snickers bar is fine, but for large items (online shopping) one trick MrsFrugalSamurai has implemented recently, is to sleep on the decision. If she still feels like she wants to buy the item, she’ll get it.

9. Pay bills on time and in full. By doing this, you’ll avoid late fees and interest, sometimes even get a pay-on-time discount too.

10. Have an emergency fund. No more timely than during the current climate. Holding an emergency fund allows you valuable breathing room should something unfortunate happen to your finances. As a general rule, you should be having around 6 months of living expenses handy. Oh, and avoid the temptation to touch the emergency fund, as it defeats the purpose.

11. Understand what you’re getting yourself into. This is where you can differentiate from most people. Actually reading through the fine print and asking any questions you have before jumping in or signing on the dotted line is a path not many people do. Believe me, my parents made this mistake when buying a property… but that’s a story for another time.

Reading the fine print at Aldi. Images of Canberra | The RiotACT
Always understand what you’re buying.

12. Past performance is not a guarantee of future. The old cliche but time and time again, people quote what happened before MUST happen again. This is WRONG. The past can be used as a guide, but you must think independently each time.

13. Keeping up with the Joneses. “Too many people spend money they haven’t earned to buy things they don’t want to impress people they don’t like”. Insane quote.

14. Avoid frugality to achieve prosperity. I know, a guy called TheFrugalSamurai saying to avoid frugality… but what I mean is, don’t have a scarcity mindset, have an abundance one. This is why I don’t follow LeanFIRE principles of saving and scrimping your way to financial independence. You can only cut so many expenses. Focus on earning and investing, whilst spending less than you earn. You should go alright.

15. Reward yourself! Lastly, personal finance should be fun! Don’t forget to reward yourself on the journey, no one is asking you to live like a Monk. Remember to smell the roses too. A good one for myself actually…

~~~

There ya go, 15 short and easy tips on how to better your personal finance habits TODAY.

Thanks for the question JD!

Oh, and do you have a personal favourite you’d like to share? You can do so in the comments below!

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12 Comments

  • Steveark

    As an older reader who has been FI for a long time and only works a tiny bit for fun, I think you covered everything. The only thing I’d possibly add is don’t buy any car you can’t pay cash for. You might take a zero interest loan for a car but only do it if you have the total amount saved up already to pay for it. Big car payments every month are a huge factor in keeping sheeple poor. I actually prefer very used cars myself, even though a brand new Ferrari would be affordable for me. But it is only affordable for me now because I never had car payments and I saved and invested that extra $500 a month for decades.

    • The Frugal Samurai

      I’d love to hear your story actually… always willing to learn from those who have tread the path prior. And yes, they say after housing, the car is the 2nd biggest expense most people will have. Haha “sheeple”, that’s a term I haven’t heard before!

  • Kristin

    Great tips! I think you covered a lot!! Personally, I love budgeting and seeing where all my money goes! My husband doesn’t care about that stuff at all though. I just talked to a lender yesterday about refinancing to a 20 yr loan instead of our 30yr! It would a whole number lower in interest! Going from 4% to 3%…

  • Budget Life List

    My husband recently jumped on the budget bandwagon and has been pretty happy with the results! I have been following a budget for years and may have had something to do with his new found excitement for budgets. This is also a good point too, that you kind of alluded to. If you are in a relationship, having a partner who is at least supportive if not proactive about a frugal life is pretty important. If one partner is a saver and the other is a spender, its hard to achieve financial security. It seems so obvious but if it was, why do so many participate in the hedonic treadmill effect? Jeeze, look at my wax and wane all over your comment form! Happy financial security!

    • The Frugal Samurai

      No I really appreciate the comment! Feel free to wax and wane all the time. Haha it sounds like you guys are definitely well in tune with each other. Both parties interested in household budgets? That’s a solid relationship right there! At the end of the day, you’ll be spending the rest of your life together so why not aspire to be on the same page!

  • Kylie Jonathan

    Hey, great post. Having good financial habits always benefits us in life. I agree with you that no one love to have debts. Thus, it is better to pay it off on time and live a stress free life.

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