A Financial Diet: 10 Essential Steps for Healthy Financial Habits
Money matters are complex and stressful but establishing healthy financial habits doesn’t have to be. A financial diet is an effective and realistic action plan used to organize, track and control spending in order to save money and build wealth. By following the 10 essential steps below, you’ll be able to go on your own financial diet to get your finances back on track.
- Determine Your Financial Goals
The first step to going on a financial diet is to determine your financial goals. What are you trying to save for? A car, house, retirement, vacation, college tuition? Knowing what your ultimate financial goals are will help shape your financial diet plan.
- Create a Budget
Once you know your financial goals, its time to create a budget. A budget outlines your income, expenses and savings path. Start by tracking your spending for at least one month. That will determine the categories and amounts in which you should allocate your money. Sticking to this budget religiously is crucial for being successful on your financial diet.
- Automate Savings and Bill Payments
Automate as much as you can. Setting up automatic savings transfers, bill payments and retirement contributions can help keep you on track. If you know the money is already accounted for and taken care of you’ll have more peace of mind. Plus, you can reward yourself when you stick to the plan and reach your financial goals.
- Increase Your Credit Score
Your financial diet should also include increasing your credit score. Pay bills on time, reduce your debts and keep old accounts open while opening new accounts sparingly. Check your credit regularly so you can dispute any mistakes or inaccuracies.
- Track Your Expenses
One of the most important steps in your financial diet is tracking your expenses. It doesn’t matter how much you spend, it matters how you spend it. Knowing how and when you spend your money is critical to maintaining your financial diet. Many apps can help you track expenses so you know where you’re spending your money.
- Try the 30-Day Rule
Before purchasing a “want” such as clothing or electronics, try the 30-day rule. Wait 30 days before buying it. See if you still want it a month later. If you still do, make sure it fits into your budget and that you can afford it.
- Avoid Impulse Buys
Avoiding impulse buys is an essential part of your financial diet. Make a list of all the items that you need ahead of time and stick to it when you go shopping. Thinking twice about whether the item is a need or a want can save you a lot of money in the long run.
- Cut Unnecessary Costs
Start cutting unnecessary costs. Review your budget and find ways to save money. Cancel subscriptions you don’t use, reduce your transportation costs or put off costly home improvements. Making small cuts to your budget can add up to big savings in the end.
- Develop Healthy Habits
Your financial diet is all about developing healthy habits. Remember to focus on progress, not perfection. Over time you can adjust your budget as necessary as your income evolves and your financial goals change.
- Seek Professional Advice
Don’t be afraid to seek professional advice if necessary. Working with a financial advisor or accountant can help you create a realistic budget and develop a financial diet plan that is right for you. They can also provide you with resources and advice on how to save money and reach your financial goals.
Creating a financial diet is one of the most important steps you can take towards creating financial freedom. By following the essential steps above, you’ll be able to establish healthy financial habits and reach your financial goals. Don’t be afraid to seek help and if necessary, ask a professional as they can provide valuable advice that can help you save money and reach your financial goals.
