Cutting out bad money habits isn’t enough. You need to add good money habits into your life, too. This is the key to improving your financial stability in the long term.
So, what are some good money habits that you should follow?
1. Save for Emergencies
You should have an emergency fund. Without a substantial emergency fund, you might not have enough in your bank account to cover an urgent, unplanned expense when it comes your way. You’ll be in a panic over how to pay it.
If you’re ever in that tricky situation, you could use your credit card as an alternative means of covering the expense. Or you could apply for a same business day loan — click here to learn about same business day loans and the eligibility requirements for them. If you meet all of the requirements, you could apply and get approved for one.
You should only use online loans for emergency purposes. They are not meant for everyday expenses, like groceries, utility bills or clothing purchases.
2. Keep Your Credit Card Balance Low
One financial habit that you should always follow is to keep your credit utilization low. Why is that?
More Available Credit
A high credit utilization rate will reduce your available credit. You won’t be able to rely on it when you really need it — like when you have an emergency expense and not enough savings to cover it. If you had a low credit utilization rate, you could put a small emergency expense onto your credit card without much worry.
Fewer Payment Problems
The higher your outstanding balances are, the more compounding interest they will adopt. You may have a harder time making bill payments to bring down the balance and catch up with the interest — even your minimum payments will be more expensive.
A steep balance also comes with a higher risk of maxing out your credit card. With a maxed-out card, you will have no available credit until you pay down the balance. Your bank could also penalize you for this misstep with an interest rate hike.
Better Credit Score
Finally, keeping your credit card balance low is better for your credit score. Your credit utilization is one of the main factors tallied for your score, along with credit history, credit mix, new credit and payment history. Lower credit utilization demonstrates that you are more responsible with your credit accounts and that you’re less at a risk of maxing out accounts or defaulting on payments.
3. Check Your Accounts
It’s not enough to check your bank accounts when you have to pay a bill. You should check them all the time. This simple financial habit comes with a lot of benefits:
- You can track your expenses and upcoming bills.
- You can determine whether you’re following the boundaries of your personal budget.
- You can spot “hidden” expenses like bank fees and subscriptions that you forgot about.
- You can see the warning signs of major problems like identity theft.
You’ll have an easier time following this habit by signing up for online banking. Download the banking app on your smartphone so that you can check on your account at any time. Use your online account to set up alerts to notify you when your checking account balance is too low, when your credit card balance is too high or when suspicious activity is detected with your account.
Are you following these three habits? Then, you should start now!