How to Build Good Money Habits to Improve Your Finances

When it comes to getting or staying out of debt, it’s crucial to build good money habits. With a solid set of positive money behaviours, it’s much easier to control your spending and avoid falling into debt.

Though roughly two-thirds of Canadians are keeping up with bills and payments, many under the age of 65 are struggling to meet their financial commitments.

In the past, we’ve covered the bad spending habits that can lead you into debt. 

Today, we’ll discuss some good spending habits you can use to improve your finances, along with ideas on how to build those habits and where you can turn to for help.

What Makes a Good Money Habit?

So, what makes for a “good” money behaviour or habit? 

When you consider your spending habits, are they helping you achieve your long term financial goals, or are they pushing you towards debt? The habits that help you improve your finances and prepare for the future are the ones most likely to be good ones!

Generally speaking, good money habits are frequently-applied actions that help you save money, avoid financial risk, and build your credit score so you can get more favourable treatment from financial organizations.

Four Examples of Good Money Behaviours

Before we get into the list of good money habit examples, it’s important to highlight that these are all suggestions and not hard rules. 

Everyone will have different financial goals and needs—so be sure to take your own into account before acting on the things in this list!

1. Using Automated Savings Tools

Setting aside money for a rainy day or an emergency is an important step for achieving (and maintaining) financial independence. 

As a result, saving money each month is a great money habit to develop. However, manually adding money to your savings can be a hassle—leading many people to forget about doing it.

This is where automated savings tools can be handy. 

For example, some banks offer the ability to automatically divert a portion of each of your paycheques to a savings account instead of your primary chequing account. Setting this up can help you save money more easily, since you’ll be setting aside some money every paycheque.

However, it can be even more advantageous, in the long run, to invest in a Registered Retirement Savings Plan (RRSP) or a Tax-Free Savings Account (TFSA). Though RRSPs and TFSAs are longer-term investment vehicles, they can be great assets for the future that helps make your retirement more comfortable.

2. Keeping Track of Your Expenses and Income

Setting a budget is immensely important for everyone. Whether you’re working part-time jobs whenever you can or have a big fancy office with a six-figure salary, it’s critical to know how much you’re spending vs. how much you’re earning.

This is where making a habit of tracking your expenses can come in handy. Having a log of what you’re spending can help you determine if you’re upside-down on your monthly expenses vs your income. Many Canadians are cutting back on spending in 2021, partially because many expect that their ability to save money may decrease.

By tracking spending and sorting your expenses into distinct categories, you can make it easier to find where you can trim your budget to save money in the long run.

3. Spending within Your Limits on Credit Cards

Credit card debt has a way of sneaking up on you. 

It can build up in a lot of ways—such as relying on credit to make it through times, missing the date on a payment, or increasing interest on a card after an introductory period ends.

One way to avoid racking up credit card debt is to pay the balance off in full every month. Paying off balances before the billing period is up keeps you from having to pay interest—which helps you save money in the long run.

Another positive for paying off your credit card bills every month is that it helps keep your utilization rate down—which is useful for building your credit score.

4. Using Coupons and Sales Offers to Minimize Frequent Expenses

Buying food, toilet paper, and other daily necessities can get surprisingly expensive. 

One way to reduce the cost of these necessities is to engage in couponing and deal hunting when you can.

Searching for ads, clipping coupons, and stacking coupon discounts (when possible) can help severely reduce the amount spent on groceries and other daily use items. 

It also helps to follow a few basic couponing tips like:

• Focus on Necessities. Just because you have a coupon for something doesn’t mean that you need to buy that item. When clipping coupons and browsing for deals, focus on the items that are necessities.
• Check Store Policies and Coupons. Not every store accepts all coupons. Some might take manufacturer’s coupons while others don’t. Some coupons might specify that they “aren’t valid or redeemable with any other offer.” Or, the expiration date for the coupon might pass before you have a chance to use it. So, it’s important to check the coupon and the store’s coupon-related policies before heading to the checkout lane.
• Stock Up on Non-Perishables When They’re On Sale. Is there a food or consumable that has a long shelf life that you know you’ll use? Consider stocking up on that item when it goes on sale. It’s important to do this with items that won’t perish since they can be stored for a long time until you need them. Stockpiling items that will expire quickly doesn’t make as much sense—even when they’re on an extremely good sale.
• Check Online Coupon Sites and Apps. There are a lot of websites and apps that can help you find the best coupons to complement your shopping preferences. For example, Savealoonie.com lets you browse different coupon categories and even has a match-up feature for all the major Canadian grocery retailers.

Three Tips for Building Good Money Habits

Sticking to any good habit can be an endurance test. 

When it comes to managing your personal finances, there are a lot of temptations to deal with that could lead you down a path of bad spending.

So, how can you ensure that you not only build some good money habits, but stick to them? Here are a few tips to help you out:

1. Start Small with Your Budgeting

When tracking your expenses, it can be tempting to try to log every little thing you buy regardless how small. 

However, this can quickly become too stressful—especially when you’re working on a tight budget. Instead of stressing over every transaction as it happens, it can help to start with just tracking your recurring expenses (like utility bills, rent, subscription services, etc.) and organizing them into a document.

2. Look for Help Where You Can

You don’t have to deal with debt or learn how to exercise good money management on your own. There are organizations that can support you as you build better personal finance skills. 

For example, a money coach or a certified Credit Counsellor could provide some advice. Or, you could turn to a family member who’s good with money for some help!

3. Use a Budget Planning Tool

Aside from seeking advice, it can help to look for budget planning tools that you can use to make managing your finances easier. For example, a budget calculator could help you look for some cuts to make in your monthly expenses. 

Meanwhile, expense trackers could help you identify what you spend the most money on and where you could cut back.

Looking for More on Building Good Money Habits?

Are you looking for help with getting out of debt or learning how to avoid debt? Credit Canada is here for you! Contact us or call 1.800.267.2272 to get started.

We have worked with countless people to help them learn the financial literacy skills and good spending habits to get (and stay) out of debt.