Learn the financial habits of successful people

Habits are a vital component of our financial lives: no-one has the mental capacity to think through every tiny financial decision in detail, so for the vast majority of the time we fall back on the things we have always done without giving the matter too much thought.

With the wrong habits this can lead us down the dangerous path of spending too much, saving too little, and getting into too much debt. So we need to ditch our bad habits, and develop the financial habits of successful people.

1. Draw up a budget
There's no way you can make sensible decisions about saving and spending if you don't know where you stand. Once you've drawn up a household budget you know how much money you need each month for bills, food, putting a roof over your head, and to put aside for annual expenses like insurance, Christmas and holidays.

You also know what you have left over to spend on non-essentials. It narrows down your options to the stage where you can easily make a sensible decision. So, for example, if you have £100 disposable cash at the end of the month and you've already downloaded a film, bought a takeaway and spent £50 on a day out, you know your new boots will have to wait for next month. By contrast, if you try to make the decision when all you know is how much you bring in each month, it's easy to be overwhelmed by the maths and end up buying them anyway.

2. Automatically pay the boring stuff first
The art of budgeting isn't just drawing it up, you need to be able to stick to it too. The easiest way to do that is to set up direct debits so that the money for the essentials comes out of your account before you have a chance to notice it has gone in - let alone to spend it.

You can arrange to pay for as much as possible by direct debit on the first of the month, but for things like food, it makes sense for a lump sum to be transferred to a separate bank account which you just use at the supermarket. It means never ending up at the end of the month with a shiny pair of new boots and nothing in the cupboards.

3. Plan ahead
Planning starts with simply thinking through the week ahead rather than living day-to-day. One of the easiest ways to do this and make a big impact immediately is with grocery shopping. If you are in the habit of arriving at the shops and buying the things you always buy, then this habit needs to be ditched.

Instead you need to start with a list of everything you plan to cook and eat for the week, then check the cupboard and make a list of the things you need to buy. Then you can simply go into the shop and buy from the list. It may take a bit longer than your old habits, but think of the time you'll save staring into your cupboards and wondering what on earth you can make for dinner that evening.

4. Plan further ahead
With a budget, you are putting money aside for future expenses, so take advantage of this, and plan things properly. The further ahead you book things like a holiday or travel tickets, the better the deal you will be able to find. So when you know you need to travel within the UK, for example, start checking ticket prices immediately and book while the prices are reasonable. Likewise, at least six months before you plan to take a holiday, you should be tracking down a deal
%VIRTUAL-ArticleSidebar-consumer-advice%
5. Plan even further ahead
Once you've mastered the art of successfully planning for major annual expenses, you need to look out for the long term. This means thinking about major expenses on the horizon, like putting children through university, moving house, or retiring. The vast majority of people end up with an enormous headache because they leave all this far too late. The solution is to put a date in the diary every year to sit down with a calculator, plan out your savings goals, and work out how much you need to save in order to reach them. Revisiting them annually will ensure you stay on track.

6. Shop around
It doesn't matter if you're buying car insurance or tins of beans, the only way you're going to get a good deal is to put in the time to check the competition. It's easy to think you can't be bothered and go for the easiest option, so it needs a change of mindset.

You need to think of every shopping trip as starting with 20 minutes on the computer comparing the price of your shopping list, or that every insurance renewal will take an hour instead of the 10 seconds you spend looking at your renewal letter thinking 'oh that's expensive' and then throwing it away.

Because you are putting in more effort, you need to take the time to reward yourself too. Set aside a good five minutes for feeling smug about the money you have saved.

7. Learn to say no
This is one of the biggest changes most people encounter. It can be tough to say no to a night out that you cannot afford, or to children who want the latest playground trend. However, if it's not in the budget, then that has to be your answer.

If saying no seems too depressing for all concerned, then say 'not yet', revisit the budget and work out how you can afford to put money aside and save up for whatever seems so important at the moment. This will have the advantage of making you put these purchases in context, so you can decide whether you'd prefer a summer holiday or a games console, and make the right decision for the right reasons.

8. Keep a diary
If you're trying your best to stick to a budget or save for the future, and keep running into trouble, then commit to keeping a diary for a couple of months. Whenever you spend anything, write down what you spent, what you bought, and how you were feeling.

This will make you think harder about your purchases; it will also show you where you are busting the budget and why. You can use this to tweak your budget to make space for the things you need. Alternatively, you can use it to pinpoint the financial habits that are leading you astray, so you can keep yourself out of the situations where you find yourself overspending.

9. Practice clear thinking
Before you spend any money, you need to make a conscious decision to do so. This doesn't mean agonising over every cup of coffee, but you need to have made basic decisions before you start - such as whether you can generally afford to drink expensive takeaway coffee.

If you can take the spontaneity and emotion out of every-day decisions, and replace them with sound financial habits, you'll find yourself much better off.

10. Embrace the challenge of your finances
By far the best way to get on top of money is to embrace the challenge. Financially successful people only make the right decisions because they understand all the choices they are making. Make it a positive challenge to master the basics over the next few months.

Not everyone learns the same way, so think about what works best for you. Do you learn well by reading about a subject? Do you prefer discussions? If that's the case can you form a 'book group', where you and your friends get to grips with a financial issue each week and discuss it?

Do you like online learning? If that's how you like to learn, can you use apps or commuter programmes? Do you prefer an expert to take the lead and talk you though things? If so, do you know a financially successful person with the time to teach you what you need to know, should you sign up for a class, or can you afford to visit a financial professional who will explain it to you? Don't think of this as a chore: it's a challenge, and an opportunity to live a financially successful life.

Build better finances on AOL Money

Financial steps you need to take... but probably won't

Hit your financial goals: 10 steps to success

10 budgeting steps to get your money under control