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Steps to better money habits

People who are "good with money" don't necessarily have a ton of it. What they have are good habits — like following a budget and saving. Need a hand getting started? These four steps can help you get smarter about your money and make a positive impact on your financial future.

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Being smart with money starts with better money habits.

There’s a big misconception out there that to be good with money, you need a lot of it. Not true. What you need to be good with money are common sense and smart, everyday habits. And that’s something any household can put into practice, regardless of how much, or how little, they have. Because when you start with the right habits, you’ll gain the knowledge and, more importantly, the confidence to become financially savvy.

They’re also habits that are simple and easy to learn, and put into practice. Think of them as four small steps that can have a big impact on your financial future.

OK, alright, here we go. Step 1: Set a budget. Sounds simple. But you’d be surprised how few people actually do it. More importantly, it is the foundation for establishing better money habits for you and your family. There’s a video on this site that can give you a step-by-step guide on how to build one called “How to Set a Budget and Stick to It”.

Alright, now that we’ve got the cornerstone laid with a budget, let’s move on to Step 2: Get a handle on your debt. First and foremost, you’ll want to stop adding to the debt you currently have. The less debt you have, the easier it’ll be to get out from under it. I mean, you’ll also want to understand what your debt is costing you over the long run and then build a plan that helps you reduce it and, eventually, yay, pay it all off. Whatever plan you put into place, you’ll want to put a stake in the ground and set a target goal so that you can actually see and feel the progress you’re making.

To help get you going, we’ve got a video that addresses debt. It will give you options on how to best tackle your debt, as well as the confidence, knowledge and step-by-step instructions to help pay it off.

Okay, let’s move on to Step 3: Establish a savings goal. This is something you’ll be better able to do because now you know how to establish a budget. Which makes reaching a savings goal that much easier. But there are some things to be aware of.

One of your big savings goals should be to establish an emergency fund. You know, before you pay down debt, before you save for your kid’s education and definitely before you save for that beach vacation. Yeah. You see, if you’ve got an emergency fund, then you’re better prepared and safeguarded against going into more debt when life throws you some unexpected curveballs, which it will. Like, let’s say like, having to get a new furnace, right? Or replacing your transmission, or having to buy a new washer and dryer. You need that. To get your own emergency fund going, check out the video on this site called “Creating a Safety Net for Life’s Unexpected Events”.

Once you’ve established an emergency fund, using your budget, you can then figure out some long-term savings goals. Whether you decide to save for retirement, home improvements or even that well-deserved beach vacation, you’ll be better able to set aside some money and have a timeline for reaching your goals. There’s even a video called “Easy Ways to Save on Everyday Expenses” that can help you improve your budget and save more money.

Finally, Step 4: Review and improve the plans you have in place whenever you can. You know, little things. Like going over your budget and looking for areas where you can cut back or you know, add to your savings. If you can, this is also the time to add in new goals. So while your emergency fund will take care of your car’s sudden transmission problems, you can set a savings goal with a specific date for buying a newer car, now that your current ride is getting up in both miles and years.

These costs should become part of your monthly expenses and be rolled up into your budget. Oh, and speaking of rolled up, hopefully you can see how these four steps can work together to establish the groundwork you need to be smarter with your money.

So now that you’ve laid a solid foundation, why not take the next step and watch the other videos on this site? They’ll help you establish even more smart money habits that you can easily put into practice. And when you do that you’ll be able to hit the ground running in all parts of your life.

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The material provided on this website is for informational use only and is not intended for financial or investment advice. Bank of America and/or its partners assume no liability for any loss or damage resulting from one's reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional when making decisions regarding your financial or investment management.

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