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The new year is here and it’s the perfect time to focus on creating good financial habits. When you work toward breaking bad money habits now, your efforts could pay you back many times over and you may feel better about your financial future.

So, what is a financial habit? The Consumer Financial Protection Bureau defines financial habits and norms as the values, standards, routine practices, and rules that people rely on to navigate their day-to-day financial lives. Good financial habits may support the ability to effectively manage money and respond quickly to financial decisions or challenges.1

If you’re not sure where to start, don’t worry. We’ve got nine good financial habits you can start with to help strengthen your financial well-being in 2024 and beyond.

Table of contents

  1. Understand your financial picture
  2. Set up a budget and track expenses
  3. Build an emergency fund
  4. Put savings on autopilot
  5. Pay down debt
  6. Pay bills on time or early
  7. Review insurance coverage each year
  8. Live on less than you earn
  9. Save early for retirement

1. Understand your financial picture

The first step toward financial health is knowing exactly how much money you have and where you spend it. Start with your take-home pay each month. Then, figure out how much you spend on basic living expenses, such as rent or mortgage, groceries, transportation, childcare, and insurance.

Next, add up what you spend on extras. These might include those coffees you buy on your way to work, ordering restaurant takeout, or keeping subscriptions to services you do not use. Track these purchases for a few months to get a good idea of where you could adjust your spending habits.

Finally, look at what you pay each month to cover debt such as credit cards, auto, or student loans. Pay attention to the interest rate you pay and the minimum monthly payments. Note the balance, payments, and when they will be paid off. It could be a good idea to review and update this information once or twice a year. This may make it easier to keep your budget current.

2. Set up a budget and track expenses

Once you have a clear picture of your finances, it is easier to set up a budget. Your budget helps you save money by showing you where you might be able to cut back.

This may help you save money by pointing out where you might be able to cut back.

While there are many tools and methods to help you do this, consider following the 50-30-20 rule to guide your needs, wants, and savings. This budget is popular because it helps people balance long-term savings and necessary expenses with spending for fun and enjoyment.

Whatever tool you use to budget, the power of this money habit comes from regularly tracking your spending. It may make the difference between just staying afloat and truly getting ahead.

3. Build an emergency fund

An unexpected expense might quickly knock your finances off track. Can you pay only part of a major car repair or medical expense? If so, you may end up using a credit card or cutting back on long-term savings to cover the cost.

To avoid this, some experts suggest setting aside 3-6 months of living expenses in an emergency fund. If that amount is too high, consider a smaller amount such as $1,000 as a starting point.

No matter the amount, it is important to include an emergency fund in your budget. Try to add to it each month. By doing so, you position yourself well if a surprise expense pops up.

4. Put savings on autopilot

It is smart to have goals like saving for retirement, a vacation, or a down payment on a home. But day-to-day living may block you from reaching those goals.

An effective way to make steady savings a habit is to put that money out of sight. You can direct a set amount from your paycheck to go into your savings automatically. Because that money never hits your checking account, you might be less tempted to use it for impulse purchases. Instead, it could grow untouched in a savings or retirement account.

5. Pay down debt

Debt can be a useful tool, but you want to avoid having it linger. The longer you carry debt, the more you may pay in interest, and that is money you could be saving.

Try to get in the habit of paying more than the minimum amount on your debt whenever possible. Even a small increase may allow you to pay off debt sooner—helping you save money on interest.

Also, think about paying off higher-interest debt first. It may be helpful to consolidate this debt into a personal loan with a lower interest rate. For example, a personal loan from Discover® allows you to combine multiple higher-rate balances into a single loan with one set regular monthly payment. And you can choose from multiple repayment options to fit your budget—from 36 up to 84 months.*

6. Pay bills on time or early

Late fees can add up. To help avoid them, set up a regular schedule for paying bills. You may also want to see if your lenders offer an automated bill-pay service. This way you won’t forget a payment. Just remember to include any of these payments in your budget planning.

If you prefer making manual payments, set regular calendar entries for your bills. You might decide to pay all your bills once or twice a month. Be sure to allow enough days before your due dates for the funds to reach your accounts.

Paying bills on time is a great way to help prevent late fees. And it might positively impact your credit score, which may be good for your credit health. Plus, a good credit score may allow you to save money down the road by lowering your interest rate when you apply for a loan.

7. Review insurance coverage each year

Your insurance needs are likely to change over time. That is why it is a good habit to review your insurance coverage at least once a year to confirm you have the right coverage for your situation.

Depending on your needs, you may have auto, life, and home (either homeowners or rental) insurance. If your situation changes, whether you move, get married, or start a family, you should check that you have the right coverage. Remember to review your health insurance at the same time.

8. Live on less than you earn

This habit might be tougher than it sounds. It may not be easy to live on less than you earn. But if you build an economical mindset early, you may enjoy greater financial security over time.

If your income grows, you might still want to make small lifestyle changes to keep your spending in check. For example, review how much you spend on restaurant meals and takeout, subscription services, clothing, and gifts. Ask yourself whether these are “wants” or “needs.”

You might find it easy to live without some of these items. And your reward may be savings that grow faster, bringing you closer to your financial goals.

9. Save early for retirement

The sooner you commit to saving for retirement, the better. This may be true even if retirement seems far away.

It is important to build retirement savings early so you might benefit from compound interest, which allows you to earn interest on the interest you collect over time.

Does your job offer a 401(k) plan? Sign up (if you haven’t already) to take advantage of this automatic savings. When you maximize your employer-matched contributions, you might get every dollar your employer is willing to give.

If you do not have access to a 401(k), you may consider a traditional or Roth IRA. Each account allows you to save for retirement while offering important tax advantages. Consult with a professional to figure out what’s right for you.

The start of a new year is the perfect time to break old habits and form new ones. Get serious about these nine good money habits in 2024, and you could soon be on the road to a healthy financial future.

Looking for ways to speed up debt repayment?How to Pay of Debt Fast: 6 Tips

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*For example, if you get approved for an $18,000 loan at 12.99% APR for a term of 72 months, you’ll pay just $361 per month.

1 https://www.cnbc.com/2023/05/15/heres-how-much-emergency-savings-you-actually-need-.html