Breeze Logo

How to build good financial habits today [4 examples]

Reviewed by
Read time
6 mins

Most children are taught good habits when they’re growing up, like brushing their teeth twice a day, washing their hands before eating, and minding their manners. We usually learn these habits at home or school; they’re said to be taught, not caught.

Unfortunately, most of us reach adulthood without being taught how to build good financial habits. Very few middle or high schools provide classes on personal finance, and most of our parents were ill-prepared to teach us how to manage our money because they hadn’t received much guidance themselves when they were growing up.

To help you build good (or better) financial habits, let's zero in on four critical areas that are essential to your long-term financial security.

Let’s start by looking at the difference between good and bad habits regarding our finances.

Good vs. bad financial habits

When it comes to managing our money, our actions tend to be repetitive and unconscious. They become habits.

An example of a good money habit is John bringing his lunch to work every day. Instead of going out for a sandwich or fast food like he used to do 3-4 times a week, he has saved over $1 thousand over the past year by brown-bagging it. He now only treats himself to a trip to the Golden Arches once a month, and it never tasted better.

Patricia, however, has developed a bad money habit. Instead of paying cash or using her debit card as she used to when buying groceries, she’s now paying with a credit card when she checks out. As a result, her card balance has slowly crept up and has reached the point where she can only make the minimum payment each month. This is creating an unhealthy stress level for Patricia and is now affecting other areas of her life.

John and Patricia’s habits can be classified as “good” or “bad” based on their outcomes. John saves money by bringing his lunch (good), while Patricia is falling behind financially by charging her groceries (bad). The numbers tell the story.

John is proof that bad habits can be broken, which is good news for Patricia and the rest of us. Of course, they’re usually not easy to break, but seeing the benefits of breaking them can often be motivating enough to change our behavior.

Let’s look at four good financial habits you can start today that will improve your standard of living, your health, and your retirement account.

1. Good earning habits

If your income totally depends on your boss giving you a raise, this habit may seem impossible. But, there are some things just about anybody can do to increase their income, including:

Earn passive income

Passive income means making money with minimal routine upkeep. For example, many people earn passive income while they sleep. They have rental properties, rent out a room in their home, they even rent their car out on the weekends. Receiving dividend payments from stocks is another way to earn more than just getting a paycheck every two weeks.

[ Related: Passive income vs. active income ]

Have a side hustle

A side hustle can be successful and bring in money if you’re willing to sacrifice some “me time.” And, it doesn’t seem like work if you’re doing something you have the aptitude, skill, and interest in.

For example, buying and selling collectibles can be a lucrative side hustle. People are willing to spend big money on collectibles like antiques, coins, sports memorabilia, etc. By learning a niche, (for example, buying and selling rare books if you love to read), you’ll have fun while turning a profit. And, you’ll probably enjoy counting your money more than spending time on social media.

[ Related: 10 practical side hustle ideas ]

2. Good spending habits

Earning $5,000 a month and spending $5,500 is not a good financial habit. Earning $5,000 and spending $4,500 is much better. You’ve got to cut your spending back by $1,000 per month to do that. Sound impossible? It might actually be easier than you think.

Do you stop for coffee and a bagel every day on your way to work? That can easily add up to $10 a day, which means you’ll save at least $200 per month by eliminating the habit of visiting the drive-thru every morning.

How often do you have food delivered every month? Are Grubhub and Uber Eats programmed as speed dial numbers on your phone? Unfortunately, thanks to the pandemic, many of us have developed the bad habit of having dinner brought to our door several times a week instead of buying groceries and cooking it ourselves. Breaking this habit can easily save a family several hundred dollars a month.

[ Related: How to live within your means ]

3. Good saving habits

Habit #2 will help you with habit #3. You can’t save if you’re spending more than you make.

One way to save more is to put as much money from each paycheck as you can into your 401(k) retirement plan at work or, if your employer doesn’t offer one, into an Individual Retirement Account (IRA). Not only will you be getting a nice tax break today, but you’ll also be growing your nest egg for the future.

Save more every year by increasing the amount of money you put into your retirement account by one percent. For example, if you’re currently contributing 6% of your pay to take advantage of your employer’s 50% matching contribution to your 401(k), bump your contribution to 7% next year. You’ll never feel these gradual increases, and you’ll have thousands of more dollars to live on during your golden years.

4. Good budgeting habits

Habits 1, 2, and 3 won’t be possible to develop if you aren’t following a budget. Keeping a budget allows you to track your spending, plan your savings, and can help motivate you to earn more. Many financial gurus believe it’s the primary factor in determining your level of financial security.

Develop the habit of sitting down at the end of each month to review how well you followed that month’s budget. Did you meet your spending and savings objectives? In which areas did you go over or under your budget? When you review the previous month, set up next month’s budget so you have a roadmap to follow for the next 30 days or so. You’ll be setting yourself up for success.

[ Related: 26 of the best personal budgeting tips ]

Final thoughts

As Aristotle famously said, “We are what we repeatedly do. Excellence, then, is not an act, but a habit.” Follow the four habits just described and you’ll be on your way to financial health that will serve you well for a lifetime.

The information and content provided herein is for educational purposes only, and should not be considered legal, tax, investment, or financial advice, recommendation, or endorsement. Breeze does not guarantee the accuracy, completeness, reliability or usefulness of any testimonials, opinions, advice, product or service offers, or other information provided here by third parties. Individuals are encouraged to seek advice from their own tax or legal counsel.

— Published May 11, 2022
Related Articles

Get started online — anytime, anywhere.

(Seriously, it's a breeze.)