How to be good with money

30+ Smart money habits to help you become good with money

Have you ever looked at the way a friend or family member manages their money and thought, “I wish I was good with money”?

For most people, it’s good money management not good luck that has led to their financial situation. Sure, those with more money, higher paying jobs or lower expenses do have a greater head start when it comes to money; but the habits involved in becoming good with money are just as vital for those with a little as they are for those with a lot!

So, let’s get smart with money. Learn to manage your money better, save more and live within your means with these 30+ smart money habits.

Start with good money management basics

Know where the money goes (& comes from!)

This seems like a really obvious point, but when I’ve done research into budgeting, the truth is that the majority of people don’t have a good understanding of their income and expenses. If you don’t know what money comes in and what goes out it is impossible to plan, budget or set goals. Without this basic information you will be living pay to pay and not making any progress towards your financial goals. Before going any further, sit down and work out all your expenses and what your income is after tax.

Budgets are sexy

Ok, I lied. Budgets aren’t sexy, but I got your attention didn’t I!

Once you know how much money comes in and how much goes out, it’s time to write a budget. Budgeting isn’t just for students or those on a low income. It’s no coincidence that huge businesses and the worlds biggest companies work to budgets. Being good with money involves planning for how you will spend it, save it and invest it. A budget is your plan for your financial future. It shows you where money is going and how much should be allocated to different areas. Budgets need to be flexible and realistic so be honest when you are developing it.

If you haven’t already, check out Budget Bootcamp. This simple to follow, self paced online budgeting course will equip you with everything you need to set up and automate your budget, pay off debt and save!

Set SMART goals

Once you’ve got your budget sorted, it is time to set some financial goals. These might be related to saving or debt reduction or they may focus on the way you spend or manage your money. Make sure your goals are achievable and specific. The SMART goal setting tool is a good start. If you haven’t heard of it before it involves setting a SMART goal, one that is:

Specific
Measurable
Action based (how are you going to do it)
Realistic
Timely

For example, you might want to pay off debt. In stead of making your goal “pay off debt”, turn it into a smart goal. This might be something like “I want to pay off $500 from my credit card by Christmas. I will do this by cutting back on two take away lunches a week and using this extra money towards my debt.”

Don’t increase your spending when you get a pay rise

It is very tempting to go out to a fancy dinner or plan a holiday when you get a pay rise. By all means celebrate, but don’t cancel out the extra money by spending it all. As our incomes increase it is easy to let our expenses increase in line with them.

I always find it interesting to talk with people with different levels of income about what they consider to be “normal” or even essential everyday expenses. This is never more apparent than when it comes to children and their activities. I never considered that specific weekly activities were essential for kids (especially very young ones) and I don’t feel my kids have suffered from not doing them, BUT, many parents will tell you that your kids “need” or “should” do these activities. You’ll hear how important they are for bonding or social skills or some other specific area that couldn’t possibly be met elsewhere. In these conversations parents begin to feel guilty and lose sight of what really is a need vs a want.

As your income goes up, don’t lose site of what is a need vs a want and end up increasing your spending. Of course you may choose to spend some additional money in new areas, but don’t let it get out of hand. Remember being good with money is also about being smart with money and knowing when to say no.

Know your weaknesses

We all have areas where we overspend. Learning not overspend is an important part of learning to be good with money, and it comes down to understanding your weaknesses. If you know looking through certain catalogs or walking into particular stores will result in a spending spree, then avoid them. Know where your money weaknesses are and take steps to stay on top of them.

Don’t lie to yourself

It is incredibly easy to lie to yourself when it comes to money. This could take many forms, from listing a totally unrealistic amount in your budget for Christmas spending so that your bottom line looks good, through to convincing yourself that a certain purchase will actually end up saving you money. Don’t fool yourself when it comes to money, you aren’t cheating anyone but you!

Automate your expenses

I’m a big fan of automating your expenses and I talk about it extensively in the Budget Bootcamp course and it is a great way to stop living pay to pay. What I mean by automating expenses, is setting aside money each week or fortnight in anticipation of different expenses. This stops the rollercoaster of spending that happens when you live from pay to pay.

Start by segmenting your expenses into specific categories, things like utilities, insurances, medical, children, Christmas etc. Work out how much you spend yearly in each category and then split that amount into regular fortnightly or weekly amounts.

For example, if you usually spend $500 a quarter on electricity, multiply that by 4 (to get a yearly amount) and then divide that number by 52 to get a weekly amount (use 26 if you are doing fortnightly). Set up an automatic direct debit to come out of your main account the day after you are paid and send the money to a specific saving account for that bill. Then, when the bill arrives you simply withdraw the money that has already been set aside to pay the bill!

Save money at home

Eat in

A take away meal for a family of four averages $60, so if you are eating one take away a week, every week, that adds up to a huge $3120 a year. When you sit down and look at the cold hard numbers, that weekly Chinese take out probably doesn’t look quite so worthwhile!

Meal plan

If you’ve spent much time on this site then you’d know I’m a pretty big advocate for meal planning. It saves time and money and reduces food waste. Need I say more? Just do it!

Check out all my weekly meal plans and recipes for some inspiration, and sign up to the newsletter to receive them in your inbox each week.

Reduce your utility expenses

Utilities are a huge expense for most households. Aside from making sure you have the best electricity and gas deals, there are also a number of things you can do around the house to reduce energy bills. Make sure you choose energy-efficient appliances as those that use less water and electricity will cost you less in the long run. Turn off lights, heating or cooling systems and electrical appliances when you aren’t using them. Try to choose a home that has good insulation as this will save you a lot on heating and cooling expenses.

Shop around for the best phone and internet deals

Prices for phone and internet packages vary enormously. You could be saving over $50 a month, simply by swapping to a new provider. Take the time to do some investigating and make sure you have the best deal.

Have the right insurances

Making sure you have the correct insurances might not save you money on a daily basis but it could save you everything in a disaster. Make sure your home, car, belongs, health and income are insured. Check out alternatives for life insurance (sites like life insurance comparisons can help). Life and income protection are two of the most commonly missed insurances, but the consequences of not having them can be catastrophic.

Don’t be a loyal customer!

Yep, I just suggested you give up on loyalty! I’m all for being a loyal friend or family member, but being a loyal customer is just costing you more. It used to be that businesses rewarded loyal customers with the best deal and pricing. Now, businesses tend to save their very best deal for recruiting new customers! Regularly review your different insurances and utilities and compare pricing with competitors. You may even find that you are better off spreading your business across multiple companies to get the best deals.

Review your home loan interest rate

Your mortgage (or rent) is likely to be your biggest single expense. A small change in interest rate can make a huge difference to your monthly payments. If you could save $2000, $5000 or more every year by changing your home loan provider it would be well worth the effort. Even just a .5% reduction in the interest rate you pay could really make a difference to your finances.

Save money when shopping

Shop with a list

Before you head out to the shops, write a list. Whether you are off to do the groceries or purchasing Christmas gifts you need to have a list of what you plan to buy, and you need to stick to it!

Never do the grocery shopping without a list. You will buy things you don’t need (another packet of pasta to add to the pantry!) and miss things you do need.

Research before you buy

If you are planning to purchase a large item that requires a significant financial investment, do some research before you buy. Google is your friend when it comes to comparing prices. Make sure you know what you should be paying and what alternatives are available.

Don’t buy on impulse

If you’ve written a list and you do your research you should also have this one covered. Never buy on impulse! Talking a purchase over with a friend or your spouse or sleeping on it is a good habit to get into to avoid overspending and impulse buys.

Resist a sale

But it was 70% off!!! Yes, I know; it’s hard to resist a bargain. The thing is though, it’s only a bargain if you actually needed it! If you know you’ll get caught up in the rush of a sale, stay away. Put those catalogs in the recycling when they arrive and don’t tempt yourself.

Don’t rely on credit

If you can’t afford it, don’t buy it! End of story. Learning to make good choices with money means knowing what you can and can’t afford and living within your means. If you’ve gotten into the habit of relying on credit for things you couldn’t otherwise afford, it’s time to stop.

Learn to love lay-by

When I was younger, lay-by was the go to option for purchases you couldn’t afford to buy from your savings. Over time, credit cards have taken over and lay buy isn’t even something most people consider. Learn to love lay-by again! You really have to want something to be prepared to go through with a lay-by and diligently pay it off each week or month. It is a great way to prevent impulse buys.

Save money on entertainment

Plan ahead

How many times have you ended up spending money needlessly just because you didn’t plan ahead. Perhaps you chose a parking station that was twice the price of the one next door or you ended up buying overpriced, gross food when you could have brought your own. A little planning can save a lot when it comes to getting out and about.

Check out daily deal sites

If you’ve got a night out planned, or are heading out for a nice dinner, check out the local deals available on different deal sites. We’ve dined at some amazing restaurants and had some incredible experiences for a fraction of the price you’d normally pay simply by shopping around for the best daily deals. They really can save you a lot of money on entertaining.

Surround yourself in friends who are good with money

If you head to the shops or out on the town with a friend who is really bad with money, chances are they will rub off on you. Our friends have a significant impact on our priorities, attitudes and even our spending habits. Surround yourself with friends who are good with money and avoid getting pulled in by friends who aren’t great when it comes to finances.

Choose the free alternative

When you plan a day out there is always a free or cheaper alternative. Choose the bus rather than driving and paying for parking. Bring a picnic or choose a share plate option. Research fun, free activities to do in your local area and be a tourist for a day.

Learn good money habits for investing and loans

Understand debt

It can be pretty confronting looking at a large debt but it is crucial to understand your financial situation and what your debt is actually costing you. Do you know your credit card interest rate and how much you are being charged each month? Have you calculated how long your debt will take to pay off if you change nothing? Spend some time getting a clear understanding of your debt and what it is costing you and make a plan to help get it under control.

Check for hidden fees

Did you know that many companies apply late fees for missing the due date on bills? You could be paying $50 or more a month just by being late. There are also fees for rejected direct debit payments for most accounts so not knowing what expenses are due to come out could cost you. Check that you aren’t being charged monthly account fees on multiple accounts and see if you can get a better deal either from your current bank or a competitor. Credit card fees can also add up to hundreds of dollars a year even if you spend nothing!

Learn about investing

Having a basic understanding of investment options is essential for good money management. If you are keeping your savings in your everyday bank account, chances are you are missing out on quite a bit of extra money. As a start, look into moving your savings into a mortgage offset account (if you have a mortgage) or a high interest savings account. If you have a reasonable amount of savings it might be worth talking with a financial planner about options for investing in shares, managed funds or property.

The way you invest your money will have a big impact on how it grows (or doesn’t) into the future.

Bring it back to basics

Don’t waste money

It’s pretty obvious, but I’d take a guess that most of us waste a fair bit of money on a daily basis. Some loose change here and there and before long you are wasting a few dollars a day. Over a year that could add up to over $1000. All for nothing! Don’t let little bits of money slip through your fingers each day. Be smart with every cent, lots of small amounts add up to one big bucket of wasted cash.

Don’t be lazy!

Being good with money means taking the initiative and making changes that improve your finances. This might be as simple as taking lunch to work rather than buying take out, or it might involve doing a full overhaul of all your insurances and loans. Don’t be lazy when it comes to money, make changes and search for deals that will save you money over the long-term. A little short-term pain for a lot of long-term gain!

Learn to save

Saving is often an afterthought when it comes to money. The concept of saving what is “left over” won’t set you up for financial success. Savings need to be treated like any other expense in your budget, and planned for accordingly. Ideally, your savings should be set aside as soon as you are paid and be consistent each week or fortnight. Don’t fall into the trap of dipping into your savings account for little expenses here and there. It shouldn’t be a supplement for your normal spending account.

Even if you are only in a position to save a very small amount, start somewhere. Set up a savings habit so that as your income grows you are already used to setting aside money regularly. Work out some savings goals and reward yourself for achieving them. Don’t go crazy blowing your savings on a reward but make sure you celebrate your successes.

Make small changes

Looking at a large debt or an overhaul of your finances can seem overwhelming and too big to tackle. You didn’t create a financial mess or big debt overnight and it will take time to turn your finances around. Every small change you make adds up to a bigger overall impact.

Do you have specific financial habits you’d like to tackle? Are there any tricks to being good with money that I’ve missed? Share your thoughts in the comments below.
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