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.
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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.
Insights into debt relief demographics
We looked at a sample of data from Freedom Debt Relief of people seeking debt relief during May 2025. The data provides insights about key characteristics of debt relief seekers.
FICO scores and enrolled debt
Curious about the credit scores of those in debt relief? In May 2025, the average FICO score for people enrolling in a debt settlement program was 593, with an average enrolled debt of $26,333. For different age groups, the FICO scores varied. For instance, those aged 51-65 had an average FICO score of 589 and an enrolled debt of $28,538. The 18-25 age group had an average FICO score of 548 and an enrolled debt of $15,062. No matter your age or debt level, it's reassuring to know you're not alone. Taking the step to seek help can lead you towards a brighter financial future.
Student loan debt – average debt by selected states.
According to the 2023 Federal Reserve Survey of Consumer Finances (SCF) the average student debt for those with a balance was $46,980. The percentage of families with student debt was 22%. (Note: It used 2022 data).
Student loan debt among those seeking debt relief is prevalent. In May 2025, 27% of the debt relief seekers had student debt. The average student debt balance (for those with student debt) was $48,703.
Here is a quick look at the top five states by average student debt balance.
| State | Percent with student loans | Average Balance for those with student loans | Average monthly payment |
|---|---|---|---|
| District of Columbia | 34 | $71,987 | $203 |
| Georgia | 29 | $59,907 | $183 |
| Mississippi | 28 | $55,347 | $145 |
| Alaska | 22 | $54,555 | $104 |
| Maryland | 31 | $54,495 | $142 |
The statistics are based on all debt relief seekers with a student loan balance over $0.
Student debt is an important part of many households' financial picture. When you examine your finances, consider your total debt and your monthly payments.
Manage Your Finances Better
Understanding your debt situation is crucial. It could be high credit use, many tradelines, or a low FICO score. The right debt relief can help you manage your money. Begin your journey to financial stability by taking the first step.
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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.