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9 key habits of the financially fit

Dawn Papandrea

October 22, 2014

People who are financially fit — regardless of their income level — tend to have similar habits that keep them out of unnecessary debt and stress.

They understand the value of good debt, and they recognize their limitations when it comes to credit cards. They strive to be debt-free, and they keep their eyes on their financial goals.

We checked in with two personal finance experts to zero in on the traits that financially healthy people tend to have, so you can aspire to achieve their money mastery…

1. They do not carry balances on their credit cards. If these people ever realize they can't pay off a balance in full, they freak out, says Beverly Harzog, credit expert and author of “Confessions of a Credit Junkie: Everything You Need to Know to Avoid the Mistakes I Made.” “That's the reaction you need to have if you want to stay debt free,” she says. Once you get complacent, it becomes “no big deal” when that balance grows, and you begin carrying multiple debt loads.

2. They know the true cost of debt — financially, mentally and physically. “Debt-free people learned at some point how much being in debt costs, including the mental strain of having to pay for things they bought a long time ago,” says Denise Winston, founder of Money Starts Here, a financial education company. There's also something about knowing what it feels like to have all of your paycheck earnings be used to pay down your debt, she adds. Whether they learned to be more responsible the hard way or learned vicariously through others who've financially struggled, debt-savvy folks do whatever it takes to avoid the burden of big balances.

3. They know their numbers. There's no impulse buying or upgrading on a whim, says Winston. All purchases are carefully planned out within the confines of a set budget. “When you take a pen and pencil and say: 'These are my fixed and variable expenses, this is my net take-home pay,' you know if you have any room to afford anything new,” she explains. Especially when it comes to purchasing bigger items, such as vacations or buying a new car or computer, Winston says that financially fit people are planners. “If they do borrow, they are smart borrowers,” she says, always doing their research and reading the fine print before signing on the dotted line.

4. They choose a lifestyle that works for them. Credit cards are not for everyone, says Harzog. “You have to have the guts to make choices that work for you,” she says. While some people can make a profit by maximizing credit card reward programs, others recognize they should go on a plastic diet.

5. They don't buy things to impress people they don't know or like. “There are so many people in debt because they wanted the designer outfit,” says Winston. Financially healthy consumers don't buy into that “keeping up with the Joneses” notion. In fact, she says, there should be an internal dialogue with every purchase you make. “Ask yourself: 'Do I need this or want this? Is this something that depreciates or appreciates? Can I really afford this now?' They are asking those questions, and most important — they are honest with themselves,” she says. Harzog points out that these people don't just live within their means, they live below them. “Ideally, you want to have money left over every month, and not spend every cent you earn,” says Harzog.

6. They always have an emergency or rainy day fund in the bank. Winston refers to this fund as a “financial spare tire.” Unexpected things will always happen at the worst times, so you don't want them to send you into a financial crisis. The financially fit have an emergency account, even if it's just scraping together $50 a paycheck. “Get a savings account that's separate from your other money and that's hard to access,” Harzog suggests. Then add $5 or $10 a week, or whatever you can afford, and watch it grow.

7. They make the debt-free lifestyle a family affair. Communicating with their partners about finances is important to the financially healthy. “Set rules together. For example, if a purchase is over $100, have a conversation before you can move forward,” Winston suggests. Financially fit people don't resort to secret spending, or end up in a power and control struggle over money. Instead, they work out a plan, and check in with each other. Once your children are old enough to understand, you can start bringing them into the conversations, too, says Winston, so they can pick up good habits while they're young.

8. They leave a little room for fun. “Most successful budgets have a miscellaneous item, or what I call a 'budgeted splurge,'” says Harzog. But the financially healthy don't necessarily live a penny-pinching life. “It's when you're not thinking about fitting little treats into your current budget that you can get into trouble,” Harzog says.

9. They take care of their accounts. These people are very in tune with their finances by getting online every couple of days to check their accounts, says Harzog. She says they also look at their free credit report yearly from each of the three credit bureaus (via AnnualCreditReport.com) to check for errors or signs of fraud or ID theft.

Living a financially fit lifestyle — and maintaining it — does take a lot of effort. But by being a smart spender and saver, you can take charge of your financial life.