Personal Finance Basics 7 Essential Habits for Saving and Investing

Personal Finance Basics: 7 Essential Habits for Saving and Investing

Many people get uncomfortable even thinking about managing their money. The topic can feel overwhelming and complicated.

Even if you are someone who gets jittery at the thought of investing and saving, there are some really useful financial basics that you can easily adopt. Embracing good financial habits creates a snowball effect.

Once you start making good savings and investment decisions, you will quickly notice how much better you feel about your financial health. This encourages you to make even more positive financial decisions.

Below, we highlight seven simple ways you can improve your financial health.

1.  Automate Your Savings Efforts

There are plenty of ways you can save automatically.

For starters, some companies offer programs that allow employees to put aside money for retirement directly from their paychecks. In most cases, companies start tax-deferred earnings at three percent. If your employer offers this, you should really take advantage of it to begin saving for retirement as soon as you start earning an income.

You can also save automatically for long term goals in addition to retirement. With most banks, you can set up preauthorized transfers from your checking account to a savings account. Ideally, your transfers will be set up so that they coincide with your paycheck direct deposit. A set amount is then transferred from your checking account to your savings account as soon as your paycheck is deposited. This way, you won’t miss the money and your savings efforts are guaranteed.

2.  Keep Fees Low

With many people anticipating future stock market returns to be low, it is more important than ever to make sure you are not paying excessive fees.

For most people, keeping investments simple is the easiest way to make sure you are not paying over the top fees. Trusting long term results over constantly moving your investments around with high fee managers is an effective way to keep fees low.

Remember, the more money you lose on fees, the less you have building up in the form of usable assets.

3.  Spend Less Than You Earn

Spend Less Than You Earn


While this may seem self-explanatory, it is surprising how many people live outside of their means on a regular basis.

Many people increase their expenses as they earn more money. A raise makes no difference to your savings if you quickly take on more expenses the second you earn it.

If you spend less than you earn, you can avoid falling into a downward financial spiral. Many people take out loans or put their purchases on high-interest credit cards. If you are constantly living outside of your means, an emergency expense can completely drain your funds.

4.  Plan For Emergencies

One of the most important savings goals is to put aside an appropriate emergency fund. Successful savers and investors understand that financial emergencies happen. You need to have money set aside for these unfortunate occasions.

Most professional financial advisors recommend aiming for an emergency fund that covers three to six months of lost wages. If you lose your job, you would not want to struggle to keep the roof over your head.

Having an emergency fund allows you to keep a clear head and deal with financial emergencies. Rather than having to panic and sell off your assets, you can calmly deal with the issue at hand if you have an emergency fund.

5.  Remain Consistent

Remain Consistent


Whether you are talking about a savings strategy or an investment policy, one of the main keys to success is consistency. Once you have come up with a savings or investing goal, you need to remain focused.

Most successful savers and investors are capable of sticking to a specific strategy for years. Remember, you can always make your savings goal more aggressive but you should not step backward. Once your strategy has become a habit, you will find it is uncomfortable to deviate from it even in small ways.

Again, setting up automatic deposits is a great way to keep your savings and investment strategies consistent.

6.  Get Into The Habit Of Long Term Thinking

Most savings and investment goals are not achieved in the short term. One of the best habits you can adopt is thinking about your financial future on a regular basis.

Successful savers and investors think ahead. You do not want to just live for today and spend any extra money on frivolous purchases. Put financial capital towards savings and investing so that your future is more comfortable than your present.

We share so many long term goals. Whether it is retirement, a child’s education fund, or purchasing property, there is a good chance your future goals are more important than an impulse buy you would make today.

7.  Reduce Debts Quickly

Nothing robs you of your income quite like high-interest debts. Whether it is an outstanding student loan, a large balance on a high-interest credit card, or even a mortgage, interest eats up the money you could otherwise save and invest.

Get into the habit of viewing debt as the enemy. Pay it down as often and as aggressively as you can. Once you are debt-free, direct the money you were once spending on minimum payments and interest fees towards your savings.

The main thing to remember is that debt is temporary. Do not let the feeling of being buried in debt overwhelm and paralyze you. Tackle your debts one at a time and prioritize paying off the low balance debts that carry the highest interest rates first. Once you have paid off one, it becomes easier to pay off the others.

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Jen M.

Jen has been with DCCU since she graduated from UW Madison - a long time ago. As the Content Strategist she helps share all the amazing things DCCU does in our community and spreads the credit union philosophy of People Helping People. When she's not working for the best credit union in south central Wisconsin, she's busy with 4 kids and a feisty little dog at home. She formed her family through adoption and has a deep passion to support foster and adoptive parents and kids. Her favorite place to relax is poolside or in front of the fireplace.