5 Habits of Financially Aware People
August 25, 2023 by Chevron Federal Credit Union
Financial awareness isn't just about having a comfortable bank balance; it's about understanding where your money goes, setting achievable goals and making informed decisions about borrowing and saving.
So, how do you know if you’re on the right track? Check out these five key moves to see how you stack up.
You know where your money goes
One of the foundational pillars of financial awareness is knowing where your money goes. If you're consistently tracking your spending and adhering to a budget, you're well on your way to being financially savvy. Tracking your spending not only helps you gain insight into your habits and patterns but also allows you to identify areas where you can cut back or redirect funds toward your goals. A budget gives you a clear picture of your financial inflows and outflows, helping you make intentional choices and avoid unnecessary debt.
If you haven’t started yet, try setting up a basic budget. By spending just a few minutes each week reviewing your budget, you can get a better handle on your financial habits.
You set long-term goals
Money is a tool, and like any tool, it's most effective when you have a plan for its use. Financially aware individuals understand the significance of setting long-term goals. These goals could range from saving for a down payment on a house to building a retirement fund. By setting clear objectives, you're taking control of your financial future and giving your money a purpose. Goals provide motivation and direction, making it easier to make everyday financial decisions that align with your aspirations.
Need help staying motivated? Try writing your goals down and setting a time each week (or each month) to check in on your progress.
You check your credit
Your credit score reflects your financial health and responsible behavior. Regularly checking your credit report is a sign that you're conscious of your financial standing. Monitoring your credit report annually helps you detect any errors, unauthorized accounts or signs of identity theft. It's a proactive step that ensures you're aware of how lenders perceive you, which can impact your ability to secure loans or favorable interest rates.
You can obtain a free copy of your credit report from each of the major credit bureaus every 12 months.
Your savings are on autopilot
Saving money consistently is a cornerstone of financial awareness. If you've automated your savings, you're setting yourself up for success. Automatic transfers to a dedicated savings account ensure that a portion of your income is earmarked for your financial goals before you even have a chance to spend it. This strategy makes saving a non-negotiable part of your financial routine. It also protects your savings from impulsive spending, creating a safety net for unexpected expenses and future plans.
Not automating yet? Many people find it easiest to set up a recurring transfer on paydays.
You know when to borrow money
Contrary to popular belief, borrowing money isn't always a negative financial choice. Financially aware individuals understand the difference between good debt and bad debt. Good debt, such as a mortgage or an education loan, can be an investment in your future. It helps you acquire assets or skills that can lead to increased earning potential. Bad debt, like high-interest credit card debt for unnecessary purchases, can hinder your financial progress. Being financially aware means knowing when borrowing can be a strategic move to achieve your goals and enhance your financial foundation.
At Chevron Federal Credit Union, we believe all of life’s milestones should be celebrated. We have tailored advice to help you whether you’re just starting out, paying off debt or nearing retirement.