5 Micro Financial Habits for New Year’s Resolutions:
It’s a new year and as always, it’s a time for reflection. Most Americans will sit back and think about how they need to lose weight, read more or be spend more time with their family. Improving finances is constantly one of the top New Year’s resolutions, but it’s often one that is never achieved. Goals can sometimes be too big and as a result, people often give up. An alternative is to start with really small goals, turn them into habits and build on from there. For example, if you want to exercise more, your first micro habit would be to start with five push ups a day. Eventually, you will want to do more push ups because you’re already doing them. That is the concept behind micro habits.
Here are five micro habits to jump start your finances:
1) Increase Your Savings Rate:
Increasing your savings rate should take you less than five minutes to accomplish. If you have a 401k plan, go to your online account and increase your savings amount by 1% of your gross salary. You can certainly increase your savings rate more than that, but you can start small with 1%.
If you make $75,000 a year and you increase your savings 1%, you’ll accumulate almost $30,000 ($29,245) if you earn 6% a year for 20 years. If you can, look to increase this number each year.
2) Use Your Points
Are you still primarily using a debit card to pay for your expenses? If so, you are potentially missing out on valuable rewards offered by credit card companies. Credit card companies offer travel points, gift items or cash back that can be used to offset credit card bills. Even if the reward is 1-2%, over time these benefits can add up. Please note that this strategy would only work if you pay off credit card bills each month.
3) Improve Financial Knowledge
There are hundreds of financial based books out there ranging from beginner to learning how to day trade. Some are better than others. If there is a financial topic that you’d be interested, choose a book and commit to reading five pages a day. If you’re looking for a book recommendation, I’d suggest The Richest Man in Babylon. It’s a great book to get you started with the financial fundamentals of savings.
4) Reduce Expenses
It’s so easy to spend money with subscription services, ads that follow you around the internet and buy now buttons. I’m going to challenge you to review your budget and look to cut down or cut out one item a month from your expenses. Maybe that item is a subscription you no longer use or it’s going out one less time a month.
5) Ensure Your Emergency Account is Funded
You should look to have between three to six months of living expenses socked away in a savings account. Take a minute to check your account. If you don’t have that amount, start saving a comfortable amount each month. If that’s $25 a month, that’s fine, just get started. If you have more than six months saved, look to transfer that amount to an account that can be invested. Investing the excess amounts will help you combat inflation and make your money work for you.