9 Simple Ways to Create Better Money Habits 

9 Simple Ways to Create Better Money Habits

Better money habits start with something James Clear talks about in his book Atomic Habits…


That’s where change of any kind starts, and especially concerning money.

In this post, I’ll explain simple ways you can create better money habits and the identity around those habits to turn your financial life around and have more abundance.

But you need to create the identity surrounding each habit for the habit to stick. 

#1 – Living within Your Means Is a Better Money Habit

It’s easy to whip out the credit card with the common attitude of “I pay it off later”. 

However, building wealth and abundance doesn’t work that way.

Living within your means helps build wealth and gives you the peace of mind knowing you don’t owe anyone.

One of the best ways to get things you want but can’t yet pay for upfront is to increase your income. 

You can do that in various ways, namely:

  • Ask for a raise at work
  • Take extra shifts or hours to add to your current income
  • Sell old stuff from around the house
  • Start a side hustle

Whichever you choose, keep in mind that it’s wise to create another income stream.

Check out my article all about creating multiple streams of income.

What is the identity?

There is certainly more than one, but the most obvious to me is the identity of being a person of integrity. 

If you are honest, you won’t allow your bank account to be overdrawn. It’s as simple as that. 

Adopt that identity and you adopt the habit of living within your means.

#2 – Embrace the “B” Word – Budget

It’s interesting how much we avoid things that actually help us…

Like budgeting.

Budget is a better money habit

Yet when budgeting regularly, it benefits us in multiple ways…

We are more able to live within our means, we have a better idea of where our money is going, and we can see how to save more.

Not to mention being able to have an idea of any extra money we have at the end of the money helps us know how best to allocate it for better future dividends.

Budgeting is definitely a better money habit to concentrate on creating.

One tool I use to help me with my budget is Everydollar.com.

What is the identity?

Perhaps for this money habit the identity could be that you are organized. 

You can adopt this identity.

And by doing that, budgeting becomes less of a burden and more of a habit you look forward to tackling each month.

…especially if you already have the habit of living within your means.

#3 – Define Your Financial Goals

Something that goes along with budgeting is defining your financial goals. 

You can’t get somewhere if you don’t know where you’re going. 

So make a plan for your finances and set some goals. 

The goals should be SMART.

SMART is an acronym…

Specific – For example, I want to increase my performance at work within x days.

Measurable – Your goal needs to be tangible and measurable. If it’s not CLEARLY easy to measure then it’s not the right goal.

Achievable – Don’t make your goal so big that you can’t achieve it. Stretch yourself, but aim small enough that you’ll hit your target.

Realistic – This goes along with achievable. For example, if you currently only have an output of x at work then it’s not realistic to say you’ll 10x it in only a month.

Time Bound – Set a timeline for when you’ll hit this goal. A goal without a timeline is just an idea. A goal with a timeline is something you’ll hit. 

What is the identity?

The identity that could help you develop the habit of defining your goals could be you’re a planner, someone who thinks ahead.

You adopt that identity and you’ll want to define your future goals.  

#4 – Automate Your Expenses as Much as Possible

It’s a simple process to set up automatic deposits and withdrawals in your bank account and if you need help, you can ask your banking institution.

By doing this you can automate your bills for certain days, you can automate a withdrawal from you checking to your savings account or vice versa, among other things. 

It’s best to regularly check your bank accounts, even if you have everything automated, just to keep tabs on them in case of any possible issues that come up.

What is the identity?

You value your time and with that identity, you’ll automate as much as you can. 

#5 – Get and Stay out of Debt 

Debt Free

Debt can hurt your financial future more than almost anything else. 

It postpones investing, saving and can cause difficulty when trying to purchase a car or a house.

Create the habit of getting out of and staying out of debt to build more abundance.

Check out my article 5 simple ways to become debt free.

What is the identity?

This is another habit that is connected to the identity of integrity.

When you are a person of integrity, you will get and stay out of debt. 

This doesn’t mean you don’t have integrity if you are in debt. It does mean that you are trying your best to get out of it and then to stay out of it.

#6 – Save – Invest – Pay Yourself First

Instead of spending the extra money at the end of the month, save it.

save invest pay yourself first to create better money habits

What’s even better is saving it for a purpose. 

By saving your money, you are taking care of you, and that’s good. You can’t help others if you are in dire straits. 

You can also invest the extra money you have.

But if you’re like most people, you get your paycheck and allocate the money to your various bills.

Then IF there is any money left over, you pay yourself. 

A better habit is to pay yourself first. You know how much you can by budgeting. 

Do you see how all of these habits help each other? They work together.

Pay yourself first or many times you won’t end up paying yourself at all.

What is the identity?

One identity that could go along with this habit is the identity of being selfless.

That might seem backwards, but paying yourself first is not selfish.

If you plan for the future and pay yourself first you can:

  1. Help more people down the road, sooner than you would imagine.
  2. Prevent your emergencies becoming the emergencies of others, like family or friends.
  3. Create a nest egg for future generations, if and when something happens to you.

There are other benefits to paying yourself first, but just from the 3 examples given, it’s clear it’s a selfless thing to do.

#7 – Use Credit Wisely Is a Better Money Habit

Credit can work for you or against you.

credit cards use credit wisely

Many wealthy people say they still use credit, but know HOW to use it wisely.

They use a credit card, for example, but then pay it off at the end of the month.

That helps build credit and has interest work FOR them, not against them.

Building the habit of using credit wisely will save you thousands of dollars.

Link to article about credit card usage

What is the identity?

This is another example of the identity of being someone of integrity. 

You pay what you owe.

It can also have the identity of being wise, being organized, and being responsible.

Adopt one or all of these identities and it will be much easier to use credit wisely.

#8 – Invest in Good Insurance

Insurance, especially health insurance, is vital.

You might be thinking you are young and healthy and don’t really need it…

But the truth of the matter is anything could happen to anyone at any time.

Just as an example, 80,000 people from ages 21-39 are diagnosed with cancer each year in the United States.

And that’s just one disease. What about diabetes, other chronic illnesses, mental health, and others?

No one is immune and should invest in health insurance.

There are other insurances to consider like home or rental insurance, auto insurance (required in many parts of the world), and pet insurance.

What is the identity?

Again, this could be the identity of being selfless. 

What would happen if you had to be hospitalized for whatever reason and didn’t have insurance?

You would probably spend all your extra time working to earn the money for the large hospital bill…IF you even could. This would take you away from family and friends, the people who need you.

Or you would probably borrow money from someone, making things harder on them.

And if it got really bad, you might even declare bankruptcy. 

Having insurance is being selfless.

#9 – Give Back

Most millionaires and billionaires will tell you they give at least 10-20% of their earnings regularly. 

What’s more, most of them will attribute much of the wealth they have gained to doing that. 

Giving is part of the game plan for most of the wealthy and those working toward becoming so. 

Some donate to a favorite charity or tithing to the church they attend. But what matters is giving. 

But why?

Among the many reasons is the fact that no one got where they are without someone helping them get there…someone else gave back.

Another is it generates gratitude. 

A Harvard Health article Giving Thanks Can Make You Happier stated, “Gratitude helps people feel more positive emotions, relish good experiences, improve their health, deal with adversity, and build strong relationships.”

Gratitude really does make a difference in life. And giving feeds gratitude.

What is the identity?

One identity connected to the habit of giving back is being a giving person, being generous. 

If you care for others and want to help them, you’ll want to give. 

And if we’re all honest with ourselves and others, we wouldn’t be where we are today (no matter how far along we are) without the help of others. 

Even babies can’t survive without help.

So, giving back is a way to help others less fortunate than yourself and helps you experience the joy of what you have.

FAQ Section

How do I change my identity?

James Clear talks about identity significantly in his book Atomic Habits. I highly recommend reading it.

He says, 

“New identities require new evidence. If you keep casting the same votes you’ve always cast, you’re going to get the same results you’ve always had. If nothing changes, nothing is going to change.

“It is a simple two-step process:

  1. Decide the type of person you want to be.
  2. Prove it to yourself with small wins.”
(Clear, Atomic Habits, p. 39)

It doesn’t have to be a difficult process. It’s simple and it works. 

I know…I’ve tried it.

Do I have to have all these habits to have success?

No…and yes. 

They work together. Once you develop certain identities, the habits will follow and ‘all boats will rise with the tide.’ 

You will naturally want to budget when you become a more organized person. 

But by budgeting, you’ll also see where you can automate your expenses, how much you can save, and what you can pay yourself each month.

They build on each other naturally with very little work.

In a Nutshell

These are nine simple ways you can create better money habits in your life to have and enjoy more abundance. 

Each habit starts with an identity that leads to the actions that create the habit. But it’s easier than it seems and anyone can do it. 

Adopt these habits and identities and your financial life will vastly and quickly improve. And you’ll be grateful you did.

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