Yep. I’m a firm believer that the dollar amount isn’t important. It’s the habit that is. Let me explain. If you have an extra $5 in your budget what do you do with it? Spend it? Save it? Lose it? Do you even know when you have an extra $5 in your budget? I’m not judging. I’m just making the argument that good financial habits are how you win with money.
Why $5 Matters
I believe that winning with money comes down to being willing to put your money to work towards your goals. That includes that extra $5 you found in your budget. If you want to win with money you have to be willing to build the habits that will take you across the finish line. Too many times too many folks don’t make progress on their goals because they believe that “it’s not good enough.” They fall into this thought pattern, “$5 isn’t enough. I’m not going to retire by putting $5 in my account. I’ll wait until I have $500 to invest.”
And then you know what happens??? They do absolutely nothing. That $500 doesn’t magically just appear and then move into their investment accounts. Nope. Why? Because they didn’t build the habit. You’ve got to build the habit of making money moves that take you closer towards your end goals. And that can start with just $5.
Which Habit Comes First?
Now I love goal setting and building positive habits but if you’re not careful you can burn yourself out real quick by trying to do too many things at one time. So let’s talk about which habits to start building and implementing first before you move on to developing others.
- Start with a budget. Head here if you don’t know how to make a budget.
- Build Starter Emergency Fund (should be 1-month’s worth of living expenses). This is where you start putting your extra money to work for your future self.
- Pay off consumer debts. Head here for our family’s 6 year journey towards debt-freedom.
- Beef up your Emergency Fund to six months of living expenses.
- If you aren’t already, start saving for retirement!
Now, there are definitely some of these habits that you can do at the same time but one must be the priority. For example, if you’re trying to pay off debt but you also need to be saving for retirement, you can totally do both at the time same time. So if you find an extra $100 in your budget this week, put $75 towards your debt and then $25 towards your Roth IRA. This way you’re still building good habits and working towards your goals.
How to Stick to & Build Good Habits
Pick one day each week that you’ll actively work towards your financial goals. Maybe it’s Friday because that’s payday. Or maybe it’s Sunday because that’s the day you can set aside time to sit down with your spouse to discuss. Doesn’t matter the day, put it in the calendar (like actually put it in the calendar). Then when that day arrives take 10 minutes to work on your financial goals.
If you’re just starting out budgeting and you need to build that habit, then you’re going to be going through your spending from the week and updating your budget accordingly. Then whatever money is leftover you’re going to make a plan for it in the upcoming week. You’ll need to make sure bills are paid and groceries are bought. Whatever else is left is your money to put towards your future.
Now, don’t stop here. Once you know you have extra money (again, even if it’s just $5) immediately do something with it. Transfer it to your Starter Emergency Fund. Pay it towards the debt you’re working on paying off. Park it in a mutual fund. Whatever the current goal is, move the money there immediately. Don’t wait. If you do, it’ll magically grow legs and walk out of your life.
As You Get Stronger
As you build up your good money habits, you may need to add in other things that help you get closer to achieving your goals. Maybe you need to reign in your grocery spending so you can have extra money to throw at your goals. Maybe you need to pull a side hustle to help beef up your Emergency Fund faster.
The point here is to start small and as the habit builds you can add more on. Start with setting up one day a week where you are dedicated to reviewing your finances. If you don’t yet have a budget that’s your first habit and goal. From there as you build the habit of working your budget start building that Starter Emergency Fund and paying off your debts. Keep on moving in the direction of your goals and you’ll achieve amazing things!
What’s one habit you’re going to work to build today?
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