We recently devoured the book Tiny Habits: The Small Changes That Change Everything by BJ Fogg, Ph.D., who writes, “Take a behavior you want, make it tiny, find where it fits naturally in your life, and nurture its growth.”
Simple enough. Fogg’s book is a grounded guide to building new habits, sustaining them and making positive changes in your life. The key is in understanding how habits work. Just like exercising regularly, losing weight or becoming more productive, changing your relationship with money requires repetition.
With this in mind, we thought about some of the small changes that would help a first-time homebuyer (or anyone, really) become financially healthy enough to get approved for a mortgage and eventually buy their dream home.
Seven adoptable and adaptable financial habits to consider
Adopting just a few of the following habits will help strengthen your financial situation and set you on the course of owning your own home!
1. Make goals achievable
Whether it’s paying off your student loan, moving from a rental to a starter home or — later down the road — saving up for a kitchen or bath renovation, setting goals for yourself is the first habit that you ought to get into.
Make them achievable: hard-to-reach goals are too easy to brush aside. Write them down, review them often, update them when necessary and share them with friends and family. Letting others know your goals will help you stay accountable and be less likely to abandon them.
2. Be fastidious about your finances
According to a recent survey, 66% of Americans check their bank accounts at least once a week. Women tend to check their accounts daily, while men take a peek monthly. We side with the women: get in the habit of scanning your account activity every day to assess how close you are to your financial goals and make sure you’re on track to achieving them.
Doing this is a helpful way to see which debit and credit transactions have posted, spot potentially fraudulent activity and avoid costly banking fees.
3. Pay bills ahead of time, not just on time
By paying bills early, you’re making sure that you’re paying the minimum amount each month. — that’s a great way to build up your credit score. You can tackle this quickly and easily by committing to automatic payments, but if that’s too much to ask, just put a reminder in your calendar a few days before each due date to schedule an online payment.
Take it a step further, and pay more than the minimum. This will help you avoid accumulating interest that can make it harder to pay off future bills, knocking your credit down a few points. Paying more than the minimum gets you to financial relief — or being debt-free — much faster.
4. Get a charge out of not charging
Impulse buying can boost your endorphins for a split second, but buyer’s remorse can come quickly and hit hard, especially when you realize you didn’t really need to blow $50 on that glitter-covered rainbow unicorn vase. To avoid impulse purchases — and overspending in general — ditch the plastic before going shopping. Same with non-cash payment options, which make it way too easy to buy stuff.
Shopping with cash in hand makes you think twice before adding items to your cart, and what you don’t spend frivolously can go towards reaching your financial goals!
5. Put savings on autopilot
You’re not alone if, paycheck after paycheck, you promise yourself to start saving some money but can’t seem to make it happen. It takes a lot of tenacity to get into the habit of saving. So, take willpower out of the equation by funneling a portion of your paycheck right to your savings account. It doesn’t have to be a lot — many people say 10% is a good goal — but as it adds up, you’ll look at your cash flow a little differently and maybe increase the amount diverted. You probably won’t miss it, and it’ll help you change your spending habits without even realizing it.
6. Unclutter your $$ life
Knowing where your important financial records are without scrambling around looking for them when you need them is a true sign of adulting. You need to have a system in place and get in the habit of dealing with financial clutter regularly.
First, identify items you’ll need to keep (pay stubs, W2-forms, tax returns, etc.). Then decide where to keep it all (file cabinet, lap, top, three-ring binder). Finally, determine when you’ll update it (monthly, quarterly, etc.). Start with a one-time deep dive to shred what you no longer need and sort the rest. Then set the alarm on your phone to remind you to tackle it again and again until it’s a habit.
7. Make lists before and after shopping
We’re all about making to-do lists. We’ve got lists on moving and home improvement projects and how to buy a condo. But we also think lists are helpful when shopping for groceries and stuff. Before venturing out, make a list of what you need, and then don’t buy anything that’s not on the list. Impulse shopping is much more likely to happen when you shop without a list.
Take this a step further by creating a financial diary. Making an itemized list of everything you buy every day will make you more aware of what you’re spending your money on. I personally realized that with my daily habit of 2 cups of coffee, I was spending over $210 a month. But slashing my caffeine intake by half, I saved $1260 a year that eventually went towards my home savings.
Changing financial habits has an impact
Don’t go it alone! If you’re a prospective first-time homebuyer and thinking of buying in the coming months, reach out to one of our local loan officers to discuss what you need to do to get ready for a mortgage loan. Or, if you’re prepared to get started, apply online today!