Last month I posted an article titled “How Healthy is Your Financial Behavior?”. In it, I discussed healthy financial behaviors and even gave you an assignment. This month we want to talk more about healthy financial behaviors and what you can do or what healthy financial behavior you can employ to improve your financial health.
Several financial behaviors may be draining your spending plan without you even realizing it, and leaks here and there can add up to spending money on things you did not intend. Below are some financial behaviors you should consider. Changing these behaviors may help you tighten up your spending plan.
When making payments on credit cards and loans, try to pay more than the minimum. Paying more than the minimum can save you from incurring a significant amount of debt in the form of interest. Here is an example: If you have a credit card with a $1,000 balance, an 18% interest rate, and you pay only the minimum payments each month it would take almost three years to pay off the balance. The total of payments would be about $1,304, meaning $304 is interest.
On the other hand, using the same balance, interest rate, and minimum amount due, let’s say you pay more than the minimum due each month. If you were to pay an additional $60 each month, or a total of $100, it would take just 1 year to pay off the balance, and the interest paid is reduced to $103, a significant saving.
As you can see, it makes a big difference to pay more than just the minimum due, in both the time it takes to pay off debt as well as how much you end up paying. Of course, the optimum plan would be to pay the balance in full each month and avoid paying interest altogether, but the most important thing is to make sure your payments fit with your spending plan.
Pay your bills on time. First, late fees can add up, so consider setting up automatic payments for your monthly bills, either through the company billing you or through your bank. Some companies even offer a small discount for enrolling in automatic payments and paperless billing, so be sure to check.
Another benefit of paying bills on time is that accounts, such as loans and credit cards, are reported to the credit bureaus and are reflected in your credit score. Thirty-five percent of your credit score is based on how you pay your bills. Therefore, on-time payments will help increase or maintain your score, while late payments will lower your score.
Read the fine print and look for fees or charges for certain actions or criteria. Banks, credit cards, and loan companies will charge fees for certain transactions or services, so be sure to read your statements carefully and know the terms and conditions. Banks may charge a fee for that “free” checking account and 0% credit cards aren’t always what they seem. For example, while the idea of transferring a credit card balance from one that charges interest to an interest-free card be sure to look for balance-transfer fees or other charges that must be paid up-front, as they may outweigh the savings, you’d receive from a 0% interest offer.
Plan your shopping trips before you head to the store. Take note of what you already have and make a list of what you need. Do not shop for things you do not need. How many times have you walked into a store for one item and you end up walking out with a full cart of merchandise totaling $100, or $200? You did not go shopping for these items but once you saw them you had to have them. Did you think about how this would affect your spending plan?
Making a list beforehand, and sticking to it, will do two things. First, it will help you from going over your spending plan category. And second, it will help you from making unnecessary purchases.
These are just a few behaviors that can help you financially. Can you add any? Comment below and let me know what you think.