21 Days to Positive Money Behavior
It is a widely accepted fact in self-help that it takes 21 days to form a habit. It has been proven that this is true for weight loss, quitting smoking, reducing alcohol intake, and other programs designed to create good money habits. You can apply it to your finances. It’s possible to improve your money management skills in just 21 days. You won’t be in a position to pay off all of your debt or solve your financial problems in just 21 days if you are in serious financial difficulty. It’s not important. You’re laying the foundation to tackle your money issues over time. These twenty-one days are meant to help you create better financial habits, so that you can avoid trouble in the future and get out of it this time. These twenty-one-days can help you get started with the basics if you haven’t done anything about your finances. Each of these can be completed in one day. It may take a whole day depending on the situation, but you can do it in one day. You can improve your money management skills by doing one thing a day. You’ll have a greater chance of forming new habits if you can manage to go three weeks without reverting back to your old ways. Determine how much money you owe. Now is the time to be honest. List all credit cards, loans, HELOCs, HELOCs, offers of “X months the same as cash”, 0% financing and so on. List all debts, even if they are small. This includes the $10 you owe to your coworker from lunch last week. If you don’t know what you owe, you can’t create a plan to become wealthier.
Doing this is pretty simple, you just need a piece of paper, or a computerized spreadsheet. You then list all the debts you have, how much you pay each month and the cost of your debt (or interest rate). Next, decide how you’d like to pay off the debt.
2. Add up your total assets including your cash, 401(k), IRA, stocks/bonds and change jar. Include an estimated value of your home, if it is owned by you. Do not include “expected” income like tax refunds and inheritances, until you receive them. Money you expect is not the money that you actually have. Many people don’t know how much money they have. You can’t create a financial plan if you don’t know how much money you have. Figure out your net worth.
Figuring your net worth is very simple. Subtract how much money you owe (assets minus liabilities) from the amount you own. Your net worth is the result. This is a useful number to have. If the number is positive, then you are doing something right and want to continue in this direction. If the number is negative, then you have problems that need to be addressed ASAP. This is not a number anyone else cares about, but it’s a good indication of where you are and where you want to go. This is important. It is important to measure regularly, because only by measuring can you improve.
4. Many people do not know their income. Most people don’t know how much money they bring in each month. Calculate what you bring home each month after deducting taxes, insurances, flex spendings, 401(k), and other deductions. If you don’t have any penalties for withdrawing interest from your savings, you can include it. You can use this amount to pay off debt, save money, and spend.
5. Get your credit reports from all three credit bureaus.
You can get one free per year from each bureau at AnnualCreditReport.com. You can check for errors, forgotten debts (if any), and other things that don’t look right. A clean report will make it easier to qualify for car loans and mortgages, if you need them. A clean report makes it easier to qualify for car loans and mortgages, if you need them.
You can find the website for annual credit report here.
Whatever you do, don’t pay to get your credit report. You can get it for free at annualcreditreport.com. You may be able get it for free from your bank or credit union.
6. Identify your spending drains.
Spending money is a fact of life. Everyone has a spending drain. Some people love to eat out. Others collect items. Still others can’t give up their morning coffee. A lot of times these spending drains are almost unconscious.
One good way to get a handle on your spending is to use a budget/expense tracking app. They categorize and track your electronic transactions. Lunch Money, a new app that is well-designed and has a great design, and Quickens Simplifi are both good apps. Quicken is a more advanced product, but Lunch Money has been developed to better meet the needs of its users. You can find Quicken here and Lunch Money here.
7. Spend nothing for one day. Do not buy coffee, do not go through the drive-thru at Target, and don’t buy gas. Try it for one day and see how you feel. Try to increase the number of days you go without spending. Find out what fees you are being charged. Find a way to reduce these fees. Call the bank and ask for a reduction, stop the activity that is causing the fees or switch banks.
9. Organize your bill paying.
Organization is not a bag or shoe box stuffed with unpaid bills. Create a system whereby bills are placed in a holding area, until they’re paid. To reduce frustration, keep all your supplies for paying bills in one location. Create a system for keeping track of your payments. To keep receipts, get a file cabinet or box. Automate as many payments as possible so that you won’t need to worry. You could create a spreadsheet that lists all your bills, their due dates and how you will pay them. This way you can mark off each bill as you pay it. Here is an example of a bill tracker:
Monthly Bill Tracker Example, created by Samantha Ealy and accessed on November 22nd 2024.
You can find the tracker here:
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10. Start keeping your receipts for purchases.
Many people buy something and simply toss the receipt. Store them in an envelope labeled with the month. Keep receipts until the return period for the item has expired. Returns are increasingly being required by more and more shops. You could be charged if you don’t have the receipt. Keep receipts up until your bank has cleared the purchase. You can also use receipts to keep track of your expenses.
11. Shred any documents that contain personal or financial data to reduce the risk of identity theft. The price of shredders has dropped dramatically and it is worth the peace-of-mind. Right now Amazon is selling a great one
for under $40 bucks, which is really inexpensive.
This is a good example:
Basic shredder good for shredding personal finance documents.
12. Balance your checkbook.
Even if you use online banking or a money management program, reconcile your bank statement with your checkbook every month. You might make a mistake or the bank may have made a mistake. Make sure your monthly accounts are accurate. You might also discover income or expenses you weren’t aware of.
13. Examine your insurance policies.
Know what your homeowners’, health, life, and car insurance policies cover and how much you’re paying for that coverage. You should talk to your broker as soon as you feel you are underinsured. Note the due date for your policy premiums.
14. Check to make sure you’re not paying more than you have to for insurance.
Once you know what you have and how much insurance you need, shop around to get the best price. You may not know the best rates until you shop around. This is something you should put on your calendar to remind yourself every year.
15. Make a grocery list and go shopping.
Take the time to learn how to inventory your pantry and identify your needs. Make a grocery list, then head out to the store. Avoid temptations and only buy what’s on your list. Sign up for the rewards program at your grocery store or use coupons. Planning your grocery budget will help you to improve your nutrition and keep your costs down.
16. Get a notebook or spreadsheet to record every penny that you spent today. You will get a better idea of how your money is spent. Continue to add entries every day. After a month you will have a better idea of where you should focus your spending. You can also use apps such as Quicken Simplifi or Lunch Money, which were mentioned earlier.
17. Create a monthly budget.
Once your income and expenses are known, you can create a plan to manage them better. The budget doesn’t need to be in stone but should be realistic to help you navigate your way through financial problems. The Federal Trade Commission provides a basic and simple overview of how to make a budget. Read something about finance.
Education is a powerful tool when it comes to your finances. Read an article or a part of a book today about a topic in finance that interests you. You may want to learn more about debt repayment or investing. Learn something new and relevant. Continue to learn and do this every day. Never stop.
19. Start contributing to your retirement.
Item 19 on the list of positive money habits is to start contributing to your retirement. Calculate how much you can save for retirement using your budget and the newfound knowledge you have about your income. You need to contribute to your retirement, whether it is in an IRA or a 401(k). Start small and gradually increase your contributions. Do not rely on the government for your retirement. You can open a retirement account with major brokerages such as Schwab or Fidelity for only $5 or $10.
