5 Good Money Habits to Start Developing Now

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As we kick off a brand-new year, take the time to reflect and celebrate what you’ve accomplished. Pretty great year, right? Don’t stop there! While you’re reveling in all the great choices you made, let’s explore a few easy changes to your financial habits that can ensure another year of unparalleled accomplishment. 😉

Whether you're on a mission to save for college, eyeing that shiny new iPhone, planning an exciting weekend getaway, or simply aspiring to be more financially savvy, these 5 simple habits will set the tone for a stellar start to the new year. This is your chance to finally kick any bad money habits to the curb and to reassess your overall financial health.

#1: Develop a Budget

Developing a budget may sound like a cliche way to get your personal finances in order, but trust us, it's a game-changer and plays a crucial role in building healthy, long-term money habits.

When building a budget, it’s important to consider all aspects of your financial situation and goals. Here are some key questions to guide you through the budgeting process.

Budgeting Questions

  1. What’s my total monthly income? Include all sources of income, like salary, bonuses, freelance work, and rental income.

  2. What are my fixed monthly expenses? Identify recurring expenses like rent or mortgage payments 🏡, utilities, insurance, and loan payments.

  3. What are my variable monthly expenses? Account for flexible expenses like eating out, gifts, and travel. 🎁

  4. What are my financial goals and priorities? Outline short- and long-term goals, like debt repayment, saving for vacation, going to college 📚, or buying your dream car!

  5. How much do I need to save each month? Think about your financial goals and determine a specific amount or percentage of your income you want to stash away.

As you’re answering these questions, keep in mind the magic formula we like to call the 50/30/20 rule – 50% of your take-home pay goes to needs, 30% goes to wants, and 20% goes to savings. The 50/30/20 rule is a great way to get started and awesome for determining your total essential living expenses, your emergency fund and more.

#2: Track Your Expenses

Tracking your expenses goes hand-in-hand with developing a budget. What areas are you spending money on where you can cut back? Eyeing new shoes? Do you really love them, or are they just part of a fast fashion trend? And how about those streaming services? When was the last time you watched anything on AppleTV+ anyway? 😳

These are just a few quick examples that could save you some coin. Carve time out to evaluate and question your spending habits. Check out your bank accounts and review credit card statements to assess your activity. With some quick adjustments you can put money saved towards things that truly bring you joy, or stash them into a savings account and boost up your net worth.

Want to take it a step further? Try your hand at the No Spend Day Challenge! Turn saving money into a game by incorporating No Spend Days into your routine. Can you go a day without spending a dime? How about extending it to several days each month? Not only will this boost your savings, but it also teaches you to be mindful about where your money goes.

#3: Maximize Your Savings

We’ve all been there in our younger years – hitting those money goals and proudly stuffing cash into a cute, pink piggy bank. 🐷 Now, it’s time to level up your savings game. Check out these modern alternatives to the old-school piggy bank and remember the golden role: hands off until you really need it!

Popular Savings Vehicles

  1. High yield savings account: You can earn higher interest rates with these accounts compared to a traditional savings account and typically, you can access your money easily.

  2. Certificates of deposit: You can earn even more interest, but there’s a catch – you can’t touch your money for a certain period of time. If you need your money early, you might have to pay a penalty.

  3. Money market account: Typically, this is a good option if you want a bit more interest than a regular savings account and still want easy access to your money.

  4. 529 savings plan: This is specifically for your education expenses (i.e. tuition, books, etc.) and typically comes with tax benefits. If you use it for something other than education, there might be penalties.

Consider opting for one of these savings vehicles over a traditional savings account or using Step. You can earn a sweet 5.00% on your Savings Goals 💰 balances if you have the Step Black card or a monthly qualifying direct deposit.¹

#4: Spend Strategically

Spending strategically is a lifelong skill that can make a big difference. It’s not just about cutting costs; it’s about finding ways that you can make intentional and informed choices that align with your financial goals.

Sometimes, just a quick moment of research can save you some major money. Lots of companies offer free gifts on your birthday month or promo codes for subscribing to newsletters. If you’re looking to spend as strategically as possible, consider comparison or price shopping before you swipe your card.

Pro tip: Double dip on savings by stacking promo codes with a rewards card. For example, Step drops new rewards bundles monthly with big names like H&M, Everlane, T-Mobile, Target, Uber and more! Keep an eye out for brands you love, enroll in a rewards bundle, and watch the rewards roll in. Better yet, level up with Step Black and score up to 8% cashback² on every purchase. Your wallet will thank you. ✨

#5: Invest

It’s natural to wonder if now is a good time to start investing or continue to build your portfolio. 🌱 Typically, it’s better to focus on time in the market rather than timing the market. This means accepting the fact that the market will have its ups and downs and taking a long-term horizon, adding to your portfolio consistently over time.

Consider your investment goals, risk tolerance, timeframe, and portfolio makeup to determine what and how much you should invest in. With Step, you can start investing even before you turn 18 and access thousands of stocks and ETFs for as little as $1.³ You can also take advantage of Round Ups and automatically invest your spare change from your morning coffee or grocery run into stocks or ETFs of your choice.

Main Takeaway

These 5 good money habits are the secret weapons we suggest you consider on your quest to become more money-savvy. Like the Step App, these tips are designed to make managing money fun, easy, and rewarding!

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