The Better Money Habits initiative powered by Bank of America in partnership with Khan Academy aims to promote financial literacy among people. Whether you are trying to talk to your children about saving or looking to purchase a house, Better Money Habits is another means of helping you gain knowledge for all financial decisions. Check out the initiative at www.bettermoneyhabits.com.
The CGS Team learned about the Better Money Habits initiative and found great information on how people can establish better money habits. If you are a member of City Girl Savings, then finances are definitely on your radar. Great money habits are a must, regardless of your financial situation. Thanks to the Better Money Habits initiative, we are summarizing the steps to help you create better money habits!
Step #1: Create & Stick to a Budget
The first step to create better money habits is to understand what money is coming in and what money is going out. The best way to do this is with a budget. A budget will allow you to properly allocate your income to take care of your expenses and put anything left over in savings.
A budget will also allow you to see where most of your spare money is going. Trust us, those $5 lattes add up quickly. If you need help creating a budget, let CGS Founder Raya help you with the CGS Personalized Budget Plans. A budget is the number one tool for financial success, so if you don’t have one…you should change that ASAP!
Step #2: Have a Plan for Debt
How can you truly save money if you have debt? Especially debt that is accumulating interest each month. Making minimum payments is not going to cut it as a plan for debt. The first part of your debt plan and the best thing you can do for yourself is stop adding to your debt. Next, you need to pull all of your debt statements together and write out what your debt is really costing you.
Write down the balances you owe and the interest rate. The only way to get rid of debt is to be diligent about paying it off. After creating a budget, use it to help you put more of your disposable income into paying off your credit cards, student loans, or any other debt you may have. Read How to Tackle Your Debt Head On for more in-depth details. Check out the CGS Debt Reduction Kit with trackers and a debt payoff guide to tackle your debt!
Step #3: Establish a Savings Goal
If you do not have an emergency savings fund yet, then that should be your first savings goal. Your emergency fund varies, but most finance professionals recommend 3-6 months’ worth of bills and expenses. The importance of an emergency fund is just what the name implies, for “emergencies”.
If you need to replace your car brakes, going into an emergency fund to pay for it instead of putting it on your credit card will save you more money and hassle in the long run. What if your credit cards are all maxed out? Your emergency fund can spot you. If you lose your job, having that emergency fund to hold you over until the next job will be a blessing.
If you already have an emergency fund, create other savings goals. Do you need a vacation? Are you hoping to buy a new car? Establishing savings goals and a plan to reach those goals will help ensure you don’t stretch yourself thin with the purchase. Who wants to go on vacation and have to worry about how they plan on paying for rent when they get back?
Step #4: Consistently Review & Improve Your Finance Plans
Your budget, debt plan and savings goals should all be written down. After they are written and you have been implementing them for a few weeks or months, evaluate your progress. Can you start saving more since you knocked out a credit card? Are there any new savings goals that you can work towards? Your financial plans should always be a work in progress. Always review and improve them as your financial situation changes.
How are you establishing better money habits? Are there any steps above that you haven’t tried? Share your feedback and opinions with the community. You never know who you could be helping!