By Elyssa Kirkham GOBankingRates.com.
Your financial health, just like your physical health, is built on dozens of small, daily decisions that eventually form habits. And while eating better and exercising more are well-known habits that will get you fit, sometimes the money habits that lead to financial health are much less obvious, though both topics can inspire plenty of debate.
While every person's financial situation is different, there are still habits that will nearly always have a positive impact on your money. These are the 10 essential money habits you can follow each day, week or month to get control over your money and build wealth instead letting your finances control you.
––Spend less than you earn: This habit is Personal Finance 101. It's always going to be true that you'll never get ahead financially if you always have more money going out than coming in. The great news is there are two ways you can work on this habit: Focus both on increasing your income and controlling your spending to live within your means.
––Pay yourself first: When people say "pay yourself first," they mean you should take your savings out of your paycheck as soon as it hits your checking account to make sure you save something before you spend it all on bills and other expenses. The key to saving successfully is to save first, save a lot _ 10 to 20 percent is often recommended _ and save often.
––Maintain an emergency fund: Virtually every personal finance expert agrees that an emergency fund is central to financial health. Building and maintaining an emergency fund can help you avoid debt and give you a reserve to draw from, which can also help you keep your financial goals on track even through life's setbacks.
Start small by saving at least one month's worth of expenses and then work your way up to saving a larger emergency fund, such as a year's worth. Having several months' worth of expense money saved up can protect you against financial concerns when crises like job loss or medical emergencies come up. ––Budget for extra expenses: In addition to basic living expenses and bills, you should also budget for other purchases you're in the habit of making. Whether it's buying a coffee twice a week, eating out on the weekends or buying gifts for friends and family, these seemingly little expenses can add up and suck your budget dry if you don't plan for them.
Write down everything you've spent money on in the past month _ go back further if you can remember or look up transaction records and receipts _ and categorize each expense. Rank each category by how important it is to you. Add the top three priorities as line items in your budget, such as $100 a month for date nights or $20 a month to buy supplies for your hobby.
For everything else, work on dropping those spending habits or finding cheaper alternatives like brewing your coffee at home.
––Save for the unexpected: Extra costs can come up frequently, and whether or not they're true emergencies, they can still set you back. Maybe your tooth filling falls out, your pet decides to eat half a rug and needs emergency medical care, you get a flat tire or your kid wants to start playing a sport. Your finances will get hit twice as hard by these unexpected expenses if you don't have extra money saved to cover them.
Having a "buffer fund" can create a little bit of wiggle room in your accounts so you can pay for these costs without going into debt or pulling money from your emergency fund. Try socking away $1,000 for each member of your household, for example _ including pets.
––Get and stay insured: In addition to a buffer fund, you should also consider insurance. Insurance is an important protection that can stand between you and bankruptcy due to a major emergency. Start with the must-have: health insurance. Medical debt is one of the most common causes of financial hardship, out-of-control debt and bankruptcy, according to the Consumer Financial Protection Bureau. Half of all overdue debt listed on credit reports is medical debt, affecting 43 million Americans, the bureau says.
Other forms of insurance also can help protect you against major expenses. Car insurance is not only a good idea, but also is required by law in nearly every state. If you're the breadwinner with kids, you should probably get a hefty term life insurance policy and you might also consider getting disability insurance. Stay current on all policies so coverage will never lapse when you and your family need it most.
Other types of insurance that you might also benefit from having could include: homeowners' insurance or renters' insurance, pet insurance, guaranteed auto protection insurance and dental insurance.
––Set financial goals: To know what daily money habits to focus on and prioritize your money management the right way, you have to know what you're trying to accomplish. Review your finances. Look specifically for the biggest drains on your money, such as overdraft fees or high-interest debt, and also spend some time thinking about what you'd like your finances to look like in the future. Then, identify specific steps required to achieve your short- and long-term money goals.
––Review your progress regularly: Set aside time each week to check on your financial goals. Did you make progress? Were there any setbacks? Track how you're doing and celebrate your wins _ not by splurging, though _ to keep yourself motivated and on course.
––Track your money: You can't put your money where it matters if you don't know where it's going. Figure out a system to keep track of your financial transactions. Whether you prefer using pen and paper to reconcile your bank accounts the old-fashioned way or using finance-tracking apps like Mint or LearnVest, you need to have a clear picture of what is happening with your money. Tracking your spending can help you quickly identify problem areas that you can improve on and see the progress you're making.
––Check financial accounts often: As part of keeping track of your money, you should check on all financial accounts regularly. You should review spending accounts, like credit cards and checking accounts, daily in terms of checking balances and tracking expenses. Review bills such as loans when making monthly payments and updating your budget to make sure you avoid overdraft or late fees.
Savings accounts should get a once-over weekly or monthly to keep them on track. Retirement accounts and investments can be reviewed less frequently, such as monthly, quarterly or twice a year.