The Habits That Make Money Last

Pay every bill on time

Payment history is the biggest single part of your FICO score at 35%, and how much you owe is next at 30%. Your score sets what you pay to borrow, insure, and sometimes rent.

• Set up autopay for at least the minimum on every account.
• Pay credit cards in full every month. Carrying a balance means paying interest on things you already bought.
• Keep your card balances low compared with your limits, even if you pay them off.

Build an emergency fund before you invest

• Starter goal: $1,000 in a separate insured savings account.
• Full goal: 3 to 6 months of essential expenses.
• Use it only for true emergencies. Refill it before going back to other goals.

Protect what you're building

Good habits can be wiped out by one event. More than 1 in 4 of today's 20-year-olds will become disabled before retirement age.

• Health insurance so an illness doesn't become debt.
• Disability insurance so you're covered if you can't work. Your ability to earn is usually your biggest asset.
• Life insurance if anyone depends on your income.
• Home and auto coverage at levels that actually protect what you own.
• A will, with current beneficiaries. Only about 1 in 4 Americans has a will. Check beneficiaries on insurance and retirement accounts after every marriage, divorce, birth, or death. Those forms usually override the will.

Tithe 10% to your local church

Give first, not with what's left over. Put it in your budget like a fixed bill. Decide ahead of time whether you'll tithe on gross or take-home pay, since churches teach it both ways, and stay consistent.

This is a high standard. Only about 4 in 10 practicing Christians give 10% or more. Starting lower and stepping up as your situation improves still builds the habit.

Save at least 10%, working toward 15%

Pay yourself right after you give. Ten percent is the floor. Fidelity's guideline is 15% of income, counting any employer match, and that assumes you start at 25 and work to 67. Start later or plan to retire earlier, and you need more.

• Always contribute enough to get your full employer match.
• Put part of every raise toward savings.
• Keep emergency cash separate from invested savings.

Get stable, affordable housing

Housing is usually your biggest bill, so make it predictable.

• Buy when you'll stay a long time and can afford the upkeep. A fixed-rate mortgage locks in principal and interest, which protects you from rising rents. Property taxes, insurance, HOA fees, and repairs still go up, so budget for them.
• Buy what you can comfortably carry, not the most the bank will approve.
• Know what a home is and isn't. It builds wealth mainly through forced savings and a fixed payment, not through big price gains. Adjusted for inflation, national home prices grew less than 0.6% a year from 1890 to 2019.
• A stable, affordable rental is a good choice too, as long as you invest what you'd otherwise put into a home.

Live below your means, starting with the big costs

The gap between what you earn and what you spend is where stability comes from. Your savings rate is the way to measure it.

• Cars first, then housing (see habit 6).
• Then the smaller things: clothes, eating out, vacations, and entertainment. Plan them and pay cash.

Keep growing your income

Living below your means works best when your means keep rising. Invest in your skills, ask for raises when you've earned them, and add income over time. Then save the raise instead of spending it.