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Good money habits: The dos and don'ts of personal finance

Lee Rawiszer Managing Principal Paradigm Financial Partners

Reading, writing, and arithmetic are core pillars of American educational institutions. American students learn to read and write from the moment they start kindergarten. As children progress through middle school and high school, they are introduced to topics ranging from biology and chemistry to history and civics. But most high school graduates will note that the practical focus of personal financial education is grossly overlooked.

The result is a nation of adults with poor money habits and a lack of understanding of how credit, debt and other financial factors impact their lives. Everyone needs a good foundation of how money works and some helpful tips to guide financial decisions in the future. Below you'll find the critical do's and don'ts you should follow to avoid money troubles and debt.


Do pay yourself first

When it comes to dispersing your money on a monthly basis, make sure you take care of your savings obligations first. In other words, pay the money you have committed to your savings and future, i.e. college savings plans for your kids, retirement accounts, etc. before you pay your regular expenses. If you have to alternate which savings plan gets the first contribution, do what works for you. By paying yourself first, you are building good personal finance skills, as well as a buffer for future expenses (college, emergencies, retirement).

Do set goals and measure progress

The best way to succeed financially is to create attainable goals and stay on track to achieve them. Setting and achieving goals puts you in charge of your money and your life. It helps you save for and realize important events like retirement and college, or fun things like vacations or new real estate.

Do establish an emergency fund

What will you do if a tree falls on your roof, you get into a car accident, or have unexpected medical bills? The expense of unforeseen circumstances, especially if an accident means being away from work for a period of time, can negatively affect your financial situation for much longer than necessary. Set aside money each month in an emergency fund to cover surprise scenarios.

Do establish retirement funds

If your employer offers retirement programs take advantage now. Put as much as you can afford into these accounts and your money could grow over time, especially if your employer matches your contribution (up to a certain percentage).

Do automate withdrawals

Automating withdrawals from your account into various savings and investment accounts is the simplest way to ensure that you continue to take the right steps to a successful financial future. Whenever possible, set up automatic monthly disbursements of your funds to the appropriate accounts. This will ensure that you pay yourself first. And you save time scheduling that transfer so you can be out enjoying your money elsewhere.


Do not live on high-interest credit

Borrowed money is just that, borrowed. Whenever you pay off a loan you will have paid back more money over time than you originally borrowed and spent. Avoid high-interest credit. Living on credit is counter-intuitive to those solid financial skills we are trying to sharpen.

Do not make minimum payments

Paying the minimum balance on credit accounts only delays the inevitable. You will have to pay off your balance eventually. Making minimum payments means that you are barely touching the principal amount owed and ensuring that the debt will be present for years to come. Contribute as much as you can to pay down interest bearing debts and get your money out of the red zone. If you have multiple interest bearing debts, choose one at a time to pay off aggressively and step by step, you will have control of your money again.

Do not spend recklessly

It's hard to live on a budget if you don't track the money you're spending. Pay attention to the where and how when you spend money so you can live within the guidelines of your budget. If you pay yourself first and prioritize the remaining money, you can still set aside a “mad money” stash to fulfill your need to spend.

Do not skip savings

Spending all of your money now and ignoring the need to save is irresponsible. It is inevitable that you will need money in the future for foreseeable reasons and there will also be unexpected occurrences in your life that will require financial attention. Don’t risk financial distress by failing to set aside an emergency fund and don’t postpone retirement in the future because you didn’t save enough of the money you make now.

Do not ignore your credit score

Your credit score is a report card on your financial health. A high credit score gives confidence to lenders and typically will land you a better interest rate when borrowing money. Conversely, a low credit score ensures that you will pay higher interest on borrowed money, if lenders make it available to you. Know the ways your credit score can be negatively affected, such as late payments, disregarded traffic tickets, or unpaid medical bills due to an unexpected emergency.

Jumping cartoon

When it comes to habits for protecting your financial security, there are five basic monetary behaviors that you should adopt to ensure you have enough money now and in the future. Mastering the 5 do's of good money habits is not going to do much for your financial health if you still take missteps with your money. Avoiding these monetary pitfalls is just as critical for your financial success. Follow these healthy financial habits and you’ll get on the right track to a more solid financial future.

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The information and content provided herein is general in nature and is for informational purposes only. It is not intended, and should not be construed, as a specific recommendation, or legal, tax, or investment advice, or a legal opinion. Individuals should contact their own professional tax advisors or other professionals to help answer questions about specific situations or needs prior to taking any action based upon this information.

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Lee RawiszerManaging Principal

As an independent financial advisor, Lee Rawiszer helps high-net-worth professionals, entertainers and business owners understand their current financial situations and define future goals. Lee believes that financial planning is a process that ...

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