Important Financial Habits To Establish
26 de agosto de 2015

The best way to avoid bankruptcy is to start creating good financial habits now so you don’t have to pay for bad habits (literally and figuratively) later. This list of important financial habits to establish will be your guide to taking financial responsibility into your own hands and experiencing financial freedom.

Live Within Your Means

Living within your means should be your number-one priority. If you spend more than your income, you will incur debt. If you are already trying to get out of debt, you should be dedicated to avoiding living beyond your means. If you find yourself chronically spending more than your income each month, consider which big monthly expense you can eliminate or reduce. You should also try not to rely on credit cards for money because eventually you will have to pay that money back.

Establish The Habit of Saving

Saving can be one of the most difficult tasks, but it is the second-most important habit to establish. Typically, people need to have three separate savings buckets. One as an emergency reserve, perhaps six to 12 months of living expenses in case you lose your job or get sick, a second reserve fund for large purchases like cars, houses, major appliances, etc, and finally a retirement fund.

Track Your Spending

You can’t reduce your spending until you know how and where you’re spending, and for that reason alone, it’s essential to track your spending. Establishing this habit will also help you should you need to submit a financial report or record for any reason (hello taxes!)

Avoid Foolish Expenses

It’s easy to see how moving into a cheaper apartment may save you a lot but small expenditures add up to big digits too. So where can you cut back? Try buying generic instead of brand-name products, avoiding waste, resisting trendy items, reusing or repairing items, carpooling and bringing lunch to work if you can. Purchasing luxury items- and trying to justify the purchase is a trap that many fall into too. A lot of people say, “oh it’s always good to buy the best quality,” but if that’s not actually accompanied by frugality in terms of the amount of things you buy, it won’t result in any savings.


In the pursuit of reduced spending, setting budgets only works if your budgets are realistic and thorough. Establish specific budget numbers for fluid categories that are feasible so that you’re not constantly blowing through them. You should be practical about the budget numbers you set for yourself, and also sensible about how you spend.

Decrease Your Debt

Typically people have either mortgage debt, credit card debt, or school debt. In all cases, making a payment plan and sticking to it is essential to restoring your balance. Pay more than the minimum or else you will find it very hard to make progress. Make your payments on time to avoid late fees. Have debt payments automatically paid from your bank account when you get your paycheck so your money doesn’t burn a hole in your pocket. If you get a bonus, pay off some debt. It’s especially important to have a plan to pay school debt down, because a borrower can’t duck it, even in distress. Federally guaranteed student loans are not dischargeable in bankruptcy, so anyone taking on school debt should have a plan from day one to get rid of it, and that should be prioritized over saving for retirement.

Pay Your Credit Card Balances In Full Each Month

If you have the financial means to do so, it’s almost always better to pay off your complete credit card balance each month then make the minimum monthly payment. An exception might be just making sure you have some cash for emergencies. Paying interest on a balance won’t help your credit score or your net worth. It may take some time to get there if you’re carrying a high balance already but to ensure you’re living within your means, make an effort to avoid purchases you can’t pay off within the month.

If you want to learn more about how to avoid bankruptcy or to get out of debt contact Citizen’s Law Group today!