5 Habits to Improve Your Financial Health

Well into February, perhaps your new year’s resolve is waning. I didn’t make any resolutions this year, but I did find myself wanting to eat healthy and declutter. Maybe I was just recovering from all the Christmas cookies and gifts.

Another popular New Year’s goal is improving one’s finances. Maybe you made a budget or pledged to reduce spending or increase savings. Maybe you vowed to cook at home or pay off debt. Whatever your goal, have you thought about what skills or habits will help you keep that resolution past the first few weeks of the year?

Most people don’t keep their resolutions because new year, new you is unrealistic. I didn’t wake up a different person on January 1, and neither did you. My will power doesn’t magically improve with the turn of the year. We really need to understand the habits and skills that make for success in an area, rather than hoping we’ll somehow have better motivation in 2020.

Let me illustrate. I’m a naturally quiet, even shy person. I’m much more comfortable around my small inner circle of friends. But I hated feeling overwhelmed and intimidated in new social situations. So I started observing what more outgoing people do in these settings, and imitating them. They approach people. They ask questions. They smile. They laugh. They tell stories. I started doing these same things, even though it felt unnatural. And soon enough, even if I still felt a bit awkward, I was able to overcome my shyness.

I bring this up because I believe people tend to have different financial personalities. Some love to spend, others love to save. I see it with my kids. One hoards his money and we have to practically force him to spend some of it. The other wants to spend her money as soon as she gets it, often on junk she will never touch again, and we have to try to talk her out of it or at least make her wait.

So what are the traits or habits of the naturally frugal? And how can anyone learn those skills, even if they aren’t second nature? Here are 5 tools to improve your financial health:

1. Plan ahead. Whether it’s making a grocery list for the week, or investing for retirement, much of financial health has to do with looking to the future. And this comes easier to some of us than others. Think about your spending pitfalls and ways to plan ahead and avoid them. For example, make a menu and grocery list so you can avoid eating out too much. Make a budget for the year (or month) and determine how much you want to save. Then, set that money aside as soon as you get paid.
2. Be patient. So much of building wealth has to do with being patient. You wait for investments to grow. You wait for hard work to pay off in a raise. You wait for a great deal on something you want to buy. Instant gratification is the enemy of financial health. When you find it hard to wait, try to remember the bigger picture of the goal you’re working toward. Some people like to create visual reminders to help them see progress while they’re waiting. Others like to find inexpensive ways to celebrate smaller steps along the way. Figure out what motivates you to wait.
3. Seek alternatives. For any problem you encounter, there’s usually an obvious option to throw money at it. But before you order for next-day delivery, try to learn the Art of the Alternative. Can you fix it? Borrow it? Use something else? Buy secondhand? DIY? Get a second quote? Ask a friend for help? There’s usually more than one option, and a little brainstorming can turn up less expensive ways to resolve the issue. If you do need to go with the pricey option, at least you’ll know it’s the best choice.
4. Prioritize. Money is always a “Would You Rather?” proposition. There’s saving, spending, giving, investing, debt payoff. There are wants and needs, both for the short and long term. Personal finance is often a matter of prioritizing, and there is usually not one right answer. Budgeting is a great way to decide your priorities and spend accordingly. If you’re not sure how to prioritize, check out Dave Ramsey’s Baby Steps, talk to a financially wise friend, or chat with a fee-only financial adviser.
5. Automate. Take the will power out of the equation by creating auto-payments for as many goals as possible. Many apps allow you to allocate money for savings through ACH. Set up auto-deductions from your paycheck straight to retirement savings. Don’t wait to see what’s leftover. Pay yourself first (assuming you can pay your bills, too). Start small if you need to, and slowly increase.

What other habits or skills do you notice among those who are good with money? What habit do you most wish to gain?