Spend less than you earn every month

Len Penzo writes this article on personal financial habits. Like all of you will have some good and some bad habits in your daily lives, so does Len, but his good habits are certainly his financial habits. Take a look at this list and pick one or two of these habits this week and add another each week until you reach your financial goals.

1. Taking advantage of your employer’s flexible spending account. These accounts not only reduce your tax liability, but they also act as a de facto quasi-savings plan.

2. Tracking your income and expenses.

3. Being careful not to overspend on gifts.

4. Paying attention to mortgage interest rates — even after you buy a home. People who fail to do this may miss out on refinance opportunities that could save them tens of thousands of dollars over the life of their loan.

5. Never buying anything on impulse. One of the best ways to help prevent this is to make a shopping list and then stick to it.

6. Opening your bills when you get them.

7. Paying your bills online when possible.

8. Doing your research before purchasing extended warranties.

9. Ignoring credit card convenience checks that come in the mail. They usually come with high fees that make them extremely expensive.

10. Saving part of your income for retirement. Try saving at least 10 percent from every paycheck; it’s never too late to start.

11. Keeping the money in your wallet to a minimum.

12. Spending less than you earn every month. File this one under “D” for “Duh!”

13. Having an exit strategy when investing. Without one, it is tough to recognize the right time to cut your losses — or take profits off the table.

14. Never assuming past performance guarantees future results.

15. Taking advantage of automatic paycheck deductions. Not only does it ensure you pay yourself first, it’s an easy and painless way to save for retirement.

16. Reading all contracts before signing on the dotted line.

17. Planning your dinner menus in advance. We do this at my house because it’s an extremely effective way to reduce our monthly food expenses.

18. Reviewing your credit card statements for errors and erroneous charges.

19. Keeping a budget. Because for most folks, when it comes to managing their money, failing to plan is the same as planning to fail.

20. Faithfully following your budget. It’s one thing to create a budget, but if you don’t have the discipline to put it into action, why bother?

21. Increasing your 401(k) contributions every time you get a raise.

22. Properly maintaining your car. By following your car’s maintenance schedule and paying a little up front, you’ll reduce the risk of encountering more costly major issues down the road.

23. Paying the bills on time. By doing so you’ll avoid spending money on needless late fees.

24. Taking advantage of coupons and internet promotional codes as often as possible.

25. Refusing to pay the minimum on your credit card bills each month. Here’s a credit card fact: making minimum payments each month will ensure you pay the maximum interest.

26. Using your credit card to buy things only if you can pay it off in full at the end of each month.

27. Leveraging “good debt” to purchase things that have the possibility of increasing in value, or providing a path to a higher income in the future.

28. Never hoping for an inheritance to solve your money problems.

29. Avoiding the use of payday loans to cover temporary financial shortfalls. Eliminate monthly shortfalls by following a budget and maintaining an emergency fund.

30. Not relying on Social Security as your primary source of retirement income.

31. Avoiding the lottery. There is a reason why the lottery is known as the Stupid Tax.

32. Setting, and then regularly reviewing and updating your savings goals.

33. Never overpaying for insurance. For example, why pay the higher auto insurance premiums for low deductibles if you rarely make claims?

34. Resisting the urge to float checks right before payday. Today, faster bank processing makes this practice much more risky than it used to be.

35. Fully understanding stocks and other financial instruments before investing in them.

36. Avoiding cigarettes. This expensive habit is one of the Four Horsemen of personal finance.

37. Avoiding wasted time clipping coupons you’ll never use.

38. Ignoring the temptation to keep up with the Joneses.

39. Buying a new car — or better yet, a newer used car — and keeping it for at least ten years. Buying new cars is costly because they can lose upwards of half their value by the time they are three years old.

40. Remembering to comparison shop whenever possible.

41. Regularly checking your credit report for errors, signs of fraud and identity theft. You’re entitled to a free credit report from Experian, TransUnion, and Equifax every 12 months — that means with proper planning you can actually get an update every four months!

42. Optimizing your 401(k) account every year. Diversifying and balancing your allocations will minimize your losses in the event of a major market downturn.

43. Negotiating whenever the opportunity presents itself.

44. Ensuring your retirement needs are taken care of prior to providing for your children’s future. What good is saving for the kids’ college education if you’ll be eating cat food in your golden years?

45. Avoiding frugality as a means to achieve prosperity. You can only free up so much money by cutting expenses.

46. Occasionally rewarding yourself by splurging.

47. Maintaining an emergency fund. Everyone should have between three and six months of living expenses in the bank.

48. Resisting the urge to tap your emergency fund for non-emergencies.

49. Avoiding interest payments whenever possible.

50. Treating your household like a business. By taking an active role in managing your finances — and looking at ways to maximize your income — you’ll ensure a brighter financial future for you and your family. Who knows; maybe you’ll even stop biting your nails.

Break your bad habits and build great new ones with TheLifeHabit

Click for more personal financial habits