6 money habits to help you start becoming financially successful

Quick insights

• Building good money habits early may help you achieve long-term financial goals.
• One of the first steps toward becoming financially independent is opening a checking account.
• Budgeting can help you plan for your immediate expenses as well as your future financial goals.

Having control of your money may lead to beneficial outcomes, such as personal growth and having more influence over your life decisions. Whether you're trying to establish financial independence from your parents or saving up for future expenses, there are several money habits that could help you on your journey.

Building smart money habits

You can build healthy money habits at any point in your life. For many young adults, having the ability to cover personal expenses without parental assistance may be a goal. And that often begins with building good money habits.

Here are six ways to potentially propel your financial success and build better habits:

1. Set up a bank account

One of the first steps of financial health may be opening your own bank accounts. This could include a checking account, savings account or both. Having a checking account will give you the ability to:

• Make purchases
• Set up direct deposit
• Write checks (for rent, college payments, etc.)
• Set up automatic bill payments

Once you get a handle on checking, you can consider opening a savings account as well. You can often do open a savings account through the same financial institution as your checking account. A savings account gives you the ability to plan for future and long-term financial goals as well as provide a financial cushion for any unexpected expenses.

2. Create a budget

Creating a budget can be a helpful tool in managing your day-to-day finances, paying off debt and building your savings.

If you’re new to budgeting, these are common steps when creating a budget:

• Calculate your monthly income: Figure out how much your take home pay is after taxes.
• Categorize your spending: You’ll want to note your living expenses and bills, like rent and utilities, as well as your non-essential expenses, like dining out.
• Set budgeting goals: Determine if you want to use excess funds to save for the future, pay down debt or a combination of the two.
• Choose a budgeting method: There are many budgeting methods you can try, including the zero-based budgeting method and the envelope budget system.
• Review your budget: You may want to set up a time to regularly and routinely update and check your budget.

3. Start an emergency fund

Regardless of where you are in your financial journey, unexpected expenses may happen. Having an emergency fund can help soften the financial impact of the unexpected. An emergency fund is money you set aside for urgent financial situations like the loss of a job or a car accident.

There is no "right" amount of money to set aside in your emergency fund. The answer will depend on your income and spending habits. Generally, your emergency fund should be able to cover somewhere between 3 and 6 months of living expenses.

4. Set savings plans and goals

The purpose of a savings plan is to help you save for a particular object, event or goal.

One way to set up a savings plan is by creating a budget and allocating a portion of your income towards a designated account on a consistent basis. As you consider your goal, it can be helpful to think of savings plans in terms of time frames:

• Short-term savings plan: Have a timeline of 0 to 3 years. For example, saving for a vacation or an event like a wedding.
• Medium-term savings plan: Are for 3-to-7-year goals. For example, saving for a down payment on a home.
• Long-term savings plan: This is for goals that you’d like to achieve in more than 7 years. For example, saving for retirement.

Determining how much you want to put towards each of these buckets will then help you determine how much to allocate to savings transfers in your monthly budget.

5. Pay off student debt

Student loans are a common expense for many people. Whether you're still in college and have student loans on the horizon or are actively paying them down, student loans are a real financial consideration for people looking to create a solid financial foundation.

If you haven’t yet taken on student loans, consider the amount of debt you’d be willing to take on, the average pay you can expect from earning your degree and how much student loans may take up of your budget.

If you’re trying to pay off your student loans, you may be able to chip away at the amount quicker by making more than the minimum payment, refinancing your loan or finding an income-driven repayment plan.

6. Plan for housing

Housing is the biggest monthly expense in many budgets. It’s not uncommon for housing to cost 30 percent or more of your take home pay. Whether you’re looking to rent or buy your first place, housing costs may be a consideration in your budget.

If you plan to rent, you might want to plan for other common housing expenses like:

• A security deposit
• Utilities, which can include electricity, gas or water
• Renters insurance

Rent can vary greatly depending on the size of the place you’re renting and where it’s located. Getting an idea of the average rent in your area can help you better plan and budget for this payment.

For those looking to buy, you may want to consider how much house you can afford and what monthly payment you’ll be comfortable with. You may also want to determine how much you’ll need for a down payment on a house.

In summary

Building healthy money habits can take time. But the habits you start today have the potential to pay dividends down the road. Your finances and how you spend your money may change over time, but starting healthy money habits today can help you better navigate your financial future.