For most people, true financial confidence doesn’t come from their net worth or income.
Instead, financial confidence comes from regular engagement with their money, and small habits that lead to big wins over time.
Here are five of those habits that can help you build your financial confidence and determination.
1- Automate your savings
The easiest way to start saving money is to take willpower out of the equation, and the best way to do that is to set up an automatic system.
Going with hands-off saving means you don’t have to make a conscious decision about whether or not you want to save $200 or buy a new TV.
There are a few different ways you can start saving automatically. The first is to change your direct deposit at work to transfer some of your paycheck directly into a separate savings account. This way, the money won’t even hit your checking account.
If you don’t want to change your direct deposit, you can also create transfers from your checking account into a savings account. Keep your checking account at a separate bank if you’re worried about self-control.
2 – Make a budget
It’s no secret – the best financial habit you can pick up is smart, consistent budgeting.
Having a budget means setting reasonable expectations, tracking your expenses and examining where you went right or wrong.
Creating a budget is difficult because it involves reconciling your idealized financial life with your reality.
Someone who spends $200 on fast food every month might not want to face the facts, but seeing how you spend money makes you aware of how every dollar truly matters in the long run.
If you’re scared to take a closer look at your spending, that’s probably a good sign that you need to start.
3 – Organize your debt with a payoff plan
List all the debt you have and write down all relevant information, including the lender, the interest rate, the monthly payment, and the total balance.
Next, decide how you want to pay it off. There are two schools of thought on debt payoff, the snowball and the avalanche method. With the avalanche method, you pay off any high-interest first because you’ll save more on interest.
The debt snowball method, popularized by Dave Ramsey, says you should pay off your debt in order from smallest balance to largest. You’ll knock out individual loans faster this way, which will instill more confidence in your finances.
Research shows that the debt snowball method is better because people become emotionally invested in getting rid of their debt sooner.
Use the snowball method if you struggle with staying motivated to pay down debt, and use the avalanche method if you simply want to save the most money.
4 – Create rules about your shopping and spending
If high spending has caused trouble before, consider making some hard-and-fast rules to curb that behavior.
Wait 24 hours before making a purchase, even longer if it’s a large purchase. The longer you hold off, the less likely it is you’ll buy something on an impulse.
When I see an item I like and don’t need, I add it to my wishlist and come back later.
5 –Review your credit score
There are countless ways to check your credit score for free.
For instance, your bank or credit card provider probably lets you monitor your credit without paying an extra fee or signing up separately.
If you check your credit regularly, you’ll notice if your account gets hacked or if you have a late payment reported. For people trying to qualify for a mortgage or other kind of loan, tracking your credit score is essential to qualifying.