7 Good Financial Habits to Master
- Mastering good financial habits can lead to more financial security.
- Aim to spend your money mindfully and know where it's going.
- Try to always have savings to fall back on while minimizing debt.
Table of Contents
The habits you adopt can have an impact on everything from your appearance to your relationships. And adopting the right financial habits could help you feel financially secure like you deserve.
Sometimes, you need to nudge yourself toward good financial habits. But if you adopt these seven habits, you may find that they help you improve your financial picture tremendously.
1. Live Below Your Means
One goal everyone should have is to avoid needing debt relief. Debt sometimes happens by circumstance, but it’s possible to largely avoid debt by living below your means. That means setting aside money each month to pay down debt or save.
Living below your means is a good financial habit to uphold if you want to make your financial goals come to life.
All it means is that you’re not spending every single dollar you bring home each month if you can help it. If you get a $3,000 monthly paycheck and you only spend $2,900 of it, that’s a win. That $100 is money you can use to pay down a credit card or stick in a savings account for future use.
2. Pay Yourself First
Savings can come in handy for a lot of different expenses, from surprise bills to paying for a new car. If you get into the habit of paying yourself first each month, you may have a much easier time boosting your savings and meeting your goals.
Paying yourself first simply means putting money into savings each time you get paid before using your earnings to cover other bills or make purchases. If you get paid $3,000 once a month, you can set up an automatic transfer so that a portion of that paycheck lands in your savings account off the bat.
That portion can be $100, $50, $20, or any amount you’re comfortable with. The key is to save something before you start spending your income. Otherwise, it’s easier to spend it all and feel like you have nothing left to save.
3. Stick to a Budget
The better a handle you have on your expenses, the easier it becomes to do things like save money and pay off debt. That’s why sticking to a budget is a good financial habit to have.
A budget should help you understand what your essential bills cost and help you find ways to cut back on spending if that’s something you feel you should do. And there are a few different ways you can approach budgeting.
If you prefer an old school method of doing things, you can write down a budget in a notebook and refer to it as bills come up. Otherwise, you can use a spreadsheet or a budgeting app. If you look around, you’ll find a number of free ones online.
4. Maintain an Emergency Fund
Surprise expenses can sneak up on you at any time. And you can’t always work them into your budget, either. If your car suddenly needs a $500 repair, that’s not something you can plan for in advance, which is why it’s so important to try to have an emergency fund.
Your emergency fund is savings you can tap when unplanned bills pop up, or during periods when your income drops (like if you’ve been laid off at work). Any amount you’re able to save is helpful. And it could be your ticket to avoiding debt when sudden expenses catch you off guard.
A fully funded emergency fund should have enough money to cover all of your expenses for at least three months with no income at all. If you are a high earner, or if you have a family that depends on your income, save six to 12 months’ worth.
5. Avoid Debt When it's Reasonable to do so
There are times in life when it’s pretty much impossible to avoid debt, like if you’re buying a house or replacing a car. Many people also can’t afford college these days without taking out student loans. But the more debt you’re able to avoid, the less money you’ll spend on interest. That, in turn, should leave you with more money to save and use for your goals.
Keeping your debt as low as possible could also be a good thing for your mental health. Many people find it challenging to juggle debt payments. If you can avoid debt when it’s reasonable to do so, such as saving for a vacation ahead of time rather than charging one on a credit card, you can reduce or eliminate one source of stress.
6. Pay Bills on Time
Being on time is a good habit in general. And paying bills on time is a good financial habit to uphold because it could help you boost your credit score or keep an already strong credit score in great shape.
Your payment history carries more weight than any other factor in your credit score calculation. If you pay your credit cards, mortgage, and student loans on time every month, it gets recorded as positive information on your credit report, which lends to a higher credit score. And the higher that score, the easier it becomes to get approved for loans at affordable rates.
7. Splurge When it Makes Sense to
Many people are wired to think that treating themselves is a bad thing, since it means giving in to temptation. But that’s just not true.
It’s not reasonable to never treat yourself to anything fun, whether it’s coffee from your local shop or concert tickets to see a band you love. The key, though, is to splurge in a meaningful way.
To that end, one good financial habit is to be mindful of what you’re spending your money on. Having a budget can help in this regard, but so can thinking through purchases before handing over a pile of cash or swiping a credit card.
You may be tempted, for example, to buy a shirt you see hanging in a store window. But before you do, ask yourself whether it’ll really make you happy, or if there’s a better thing to spend $45 on. You may find that using that $45 to have dinner with your closest friends is a more meaningful use of that money.
Good Financial Habits Lead to a Better Financial Future
Learning good financial habits could help you feel more confident about money, meet goals, and avoid debt and stress. Aim to adopt these good financial habits, but if need be, do things one at a time so you don’t get overwhelmed.
There’s nothing wrong with adjusting to each habit on this list before moving on to the next. And if you do, you may find that you’re much happier with your financial situation on a whole.
Debt relief by the numbers
We looked at a sample of data from Freedom Debt Relief of people seeking credit card debt relief during June 2025. This data reveals the diversity of individuals seeking help and provides insights into some of their key characteristics.
Credit utilization and debt relief
How are people using their credit before seeking help? Credit utilization measures how much of a credit line is being used. For example, if you have a credit line of $10,000 and your balance is $3,000, that is a credit utilization of 30%. High credit utilization often signals financial stress. We have looked at people who are seeking debt relief and their credit utilization. (Low credit utilization is 30% or less, medium is between 31% and 50%, high is between 51% and 75%, very high is between 76% to 100%, and over-utilized over 100%). In June 2025, people seeking debt relief had an average of 75% credit utilization.
Here are some interesting numbers:
| Credit utilization bucket | Percent of debt relief seekers |
|---|---|
| Over utilized | 30% |
| Very high | 32% |
| High | 19% |
| Medium | 10% |
| Low | 9% |
The statistics refer to people who had a credit card balance greater than $0.
You don't have to have high credit utilization to look for a debt relief solution. There are a number of solutions for people, whether they have maxed out their credit cards or still have a significant part available.
Personal loan balances – average debt by selected states
Personal loans are one type of installment loans. Generally you borrow at a fixed rate with a fixed monthly payment.
In June 2025, 44% of the debt relief seekers had a personal loan. The average personal loan was $10,718, and the average monthly payment was $362.
Here's a quick look at the top five states by average personal loan balance.
| State | % with personal loan | Avg personal loan balance | Average personal loan original amount | Avg personal loan monthly payment |
|---|---|---|---|---|
| Massachusetts | 42% | $14,653 | $21,431 | $474 |
| Connecticut | 44% | $13,546 | $21,163 | $475 |
| New York | 37% | $13,499 | $20,464 | $447 |
| New Hampshire | 49% | $13,206 | $18,625 | $410 |
| Minnesota | 44% | $12,944 | $18,836 | $470 |
Personal loans are an important financial tool. You can use them for debt consolidation. You can also use them to make large purchases, do home improvements, or for other purposes.
Regain Financial Freedom
Seeking debt relief can be the first step toward financial freedom. Are you struggling with debt? Explore options for debt relief to regain control of your finances. It doesn't matter how old you are or what your FICO score or credit utilization is. Take the first step towards a brighter financial future today.
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Author Information
Written by
Maurie Backman
Maurie Backman is a personal finance writer with over 10 years of experience. Her coverage areas include retirement, investing, real estate, and credit and debt management.
Reviewed by
Kimberly Rotter
Kimberly Rotter is a financial counselor and consumer credit expert who helps people with average or low incomes discover how to create wealth and opportunities. She’s a veteran writer and editor who has spent more than 30 years creating thousands of hours of educational content in every possible format.
How long does it take to build an emergency fund?
Try to save the first $1,000 within 6-12 months. Be aggressive and make sacrifices. Challenge yourself to make a budget, look for ways to save, and set milestones to reach and celebrate.
Here’s how one family of four might do it if their goal is to save $2,500.
Drag everything unneeded out of the closets and sell it, netting $700
Give up two subscriptions: $40 per month
Shave 10% off the grocery bill: $60 per month
Switch mobile plans: $50 per month
Cut one restaurant dinner out: $100 per month
Cut 10% of driving: $25 per month
Goal reached in less than 7 months.
How long does it take to build a good credit score?
“Good” is a relative number, depending on where you’re starting from. Most lenders consider a good credit score to be 670 to 739. Above 760 is considered excellent. Establishing your credit score from scratch can take several months, and several years to build and maintain it.
You can speed up the process by opening up a credit account, keeping your balance low, and paying on time every month. Almost half of Americans have FICO scores of 740 or better, and so can you in time.
What are the three Rs of budgeting?
The three Rs of budgeting align with the three Rs for environmental responsibility:
Reduce: cut down your expenses, especially the non-essentials
Reuse: reuse what you have to avoid spending on new things
Recycle: get creative and recycle items to cut costs.