8 of the best financial habits to develop

Written by Glen James

Host of the money money money (formerly my millennial money) & Retire Right podcasts & author of The Quick-Start Guide to Investing.

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What one simple financial habit has made a massive impact on your finances? Here’s what our community said:

#1 sounds basic, but budgeting (honestly)

• Jade: Honest budgeting and goal setting.

• Lisa: It’s a cliche, but doing a budget has been a game changer!

• Mitch: GJSP yasssss (that’s the Glen James Spending Plan for any newbies)

I love how a few people felt this was basic but to me that’s exactly why we have to say it out loud! It’s too easily overlooked. Budgeting, or what I call a ‘spending plan’, feels so simple but I could ask so many people in our community who have found it to make a massive difference on their finances—so many hands would go up. And I love Jade’s mention of being honest. It can be a bit freaky to list your expenses and see what you’re actually spending on. Don’t lie to yourself, be honest. It’s ok! We all overspend at one time or another. The best thing is, you’re looking at it, and trying to figure out how to cut back.

Enrol in my Glen James Spending Plan if you need a spending plan. Go! Do it. Now.

#2 using cash to pay for stuff, not credit cards

• Mathew: Not having a credit card.

• Ben: If I can’t afford to pay cash for it (except housing of course) I can’t afford it.

I think many people are afraid to hear the words: ‘you can’t afford it’. Time to rip that bandaid off:

You can’t afford it.

You can’t afford it.

You can’t afford it.

It’s ok to not be able to afford something right this second. Let’s adjust the approach and make it ‘you can’t afford it…right now.’ Focus on building up the cash you need for items you’re looking at, and buy it when you can afford it (when you have the cash saved up). No more credit cards.

#3 automating money to bill paying accounts

• Shell: AUTOMATION!!!! - removing my terrible memory from the equation. I’m now in credit with all bills, so no bill shock.

• Stefan: Automation.

• Christian: Budgeting and direct debits and transfers.

If you’ve ever heard me talk about my own spending habits you’ll know I’m a spender, so keeping my hands off my money is critical. That’s where automation is key. As money comes in, I’ve set up BPAY’s automatic direct debits to send money off to accounts and bills I know are coming. This leaves me with a much better understanding of what I genuinely need to pay for before I go and splurge the rest (yeah baby!). Automating your money is such a practical step towards building up savings, investing money and paying off bills to avoid bill shock.

#4 crushing bad spending habits

• Kim: Add things to cart and then close the window

• Lauren: Stop going to the shops for something to do with my toddler. I always bought stuff we needed but didn’t REALLY need.

• Penny: Asking myself ‘do I really need it, or do I just want it?’ It’s almost always the latter.

I love these responses that might seem, at first, to be completely unrelated. Wrong. These community members are all hacking their own personal habits. First up you need to identify what the habit is: what is yours? Then you need to know when and how you’re doing it: online, in person, etc. Then set up steps to stop that. Close the browser, don’t go to the shops, analyse why you’re considering buying that item, remove your debit card account, etc. Get in your own way and build up barriers to entry. If the chocolate isn’t in the pantry, you’re not eating it, right? Make it hard to continue that habit. 

#5 working on your money mindset

• Teresa: Talking about money in a positive manner with my teens. My parents didn’t talk about money and I feel like I started on the back foot. Sharing my learning, goals and mistakes with them.

Money mindset is something we talk about on the show on and off all year round because our beliefs about money direct our actions with it, often subconsciously. So let me ask you: how do you feel about money? Why? Where did that come from? Teresa’s point is awesome because she’s highlighted how intentional she wants to be with money, and she’s brought her kids into that conversation. If you have a positive attitude toward money, you’re more likely to make it work for you. But if you have a negative outlook, you might find yourself either avoiding money chats or being super stingy—neither of which is ideal.

#6 paying yourself first

• Courtney: paying myself first - each pay I allocate money to shares/savings first, then needs, and then wants last. It's definitely helped with my overspending habit, and when I do need a dopamine hit I tend to put that in investments instead of buying 'things' (unless I need it)

• Dev Raga: pay myself first. Absolute gold.

• Acacia: paying myself first.

Shout out to Dev! Dev hosts a podcast we help edit and distribute called Dev Raga Personal Finance. He’s been a big advocate for this approach for a long time—the idea of paying yourself first. This is a great change of mindset for those who find they get paid and immediately go on a spending spree. Next minute you feel broke. This approach involves choosing how much of your income you’d like to save and invest, before you allocate on spending. So essentially you make your expenses fit into whatever is leftover. A lot of people spend first, then save and invest with what’s leftover. This approach flips that on its head, and I reckon if it works for you, do it.

#7 watching out for lifestyle creep

• Kate: Skimming any wage increases off into a separate savings/investing account, to stop lifestyle creep. We haven’t “taken” a pay increase in a few years. But boy have our savings and investments grown!

I love this sneaky hack! Treating any pay increase like it doesn’t exist is such a brilliant idea. You could build up some juicy savings or cash to invest with this approach. Love it Kate!

#8 spending less than you earn

• Shannon: Living below my means. Investing where I can

• Scott: Spending less than I earn. That’s essentially the golden rule.

This is one of my personal favourite principles when it comes to personal finances. Simply taking stock of what you can afford to spend vs what you earn, and deliberately setting your spending below that. Knowing how to make money isn’t enough, you need to build on that by keeping your expenses below the amount you make. A good portion of my advice clients who faced financial troubles were doing just that—spending more than what they earnt. Again, it feels basic. But your behaviour controls your life! Get on top of what you’re earning vs spending and get the balance right.