In this ‘Make Credit Work For You’ post, we look at what an expert recommends as good money habits. No matter what income you are on – Finance Blogger David Ning says it is what you do with that income that sets you apart and means you have a better life. His views were featured in news.com.au this week and we look at what those seven habits are, and how you can improve your dealings with money and protect your finances and your credit file for a better life.

By Graham Doessel, Founder and CEO of MyCRA Credit Rating Repair and www.fixmybadcredit.com.au.

You don’t have to be poor to be broke, and statistics prove it. In September last year the Australian Bureau of Statistics revealed that nearly 8 per cent of the nation’s richest households were living on credit.

Of the top 20 per cent of households earning the most money, 3 per cent could not afford to pay a gas, electricity or phone bill on time during 2009-10. See more in the article ‘Aussie strugglers living beyond means.’

Living this way is living dangerously. Often you are said to be robbing Peter to pay Paul. If something goes wrong, you can run a real risk of getting into arrears and copping a default on your credit file – or worse.

The secret of not living paycheck-to-paycheck (or card repayment to card repayment) is by following some simple life habits.

Frugality doesn’t mean giving up luxury and the things you love but changing your attitude towards money.

David Ning says that the well known 7 habits of highly effective people can be adapted to become the seven habits of highly frugal people and help you live a happier and more frugal lifestyle.

Here are those 7 habits of highly frugal people as featured in news.com.au:

Habit one: Be proactive Mr Ning compares the habits of highly frugal people to the seven habits of highly effective people and the first step is to take responsibility.

Quit blaming your childhood, your school, your boss or the Government and accept that you are in control of the direction of your life.

The more you ignore the situation, the worse it will get.

“Take a long hard look at your finances — your budget, debts, income, and expenses, and try to understand where your money is going and where you can budget better,” writes Mr Ning.

Then you must tell people of your hope of being more financially stable which can help you focus on your goal and avoid the peer pressure that makes budgeting and frugality hard.

Habit two: Begin with the end in mind Those who are successful in reaching their goals are those who can envisage them from the beginning.

“If you don’t visualise what you want, then you’re at risk of other people and external circumstances influencing your life – because you’re not influencing it yourself,” he says.

You must decide if your goal is to be debt free, build a savings account of a certain value, or live on one income in a two-income household.

Then decide how you’re going to get there. This involves identifying obstacles standing in your way such as credit card debts. Or behavioral obstacles such as spending $10 every day on junk food.

Habit three: put first things first Knowing why you’re doing something can help make you do it and that means knowing what is most valuable and worthy to you. It’s a lot more difficult to say “no” to something if you don’t know why you’re saying no and not focused on what’s important to you.

It’s easy to spend more than your budgeted amount each month when you put everything before your finances such as “worrying about missing out on a dinner with friends, feel as though you have to cater a birthday party for your son and 50 of his closest friends, or don’t want to wear the same suit to a work conference two years in a row.”

It’s important to be able to “just say no”.

Habit four: Think win-win Don’t compare yourself to others and constantly compete with others. Instead, it’s better to have a win-win mindset which will allow you to see mutual benefits from all your dealings with people and realise that there’s enough for everyone to benefit from situations.

Don’t think “it’s not fair” that others have a better car or a bigger house because you don’t know the whole story – and it could just be a façade for covering their huge debts.

It’s important to focus on your own finances and know you’ll get to where you want to be some day.

“True wealth is not measured in possessions, but in assets. When the value of your assets is greater than the amount you owe on mortgages, car loans, and credit card debts, then you have a strong net worth and are truly wealthy.”

Habit five: Communication Listening with the intention to understand can help you reach your goal of frugality. “Don’t just wait for your turn to talk; pay attention to what people are trying to tell you,” writes Mr Ning.

To be effective in your goal of frugality, you need to be able to listen to and understand the goals and behaviours of the other people in your life. If you’re saving but your partner is spending like crazy then your behaviours offset each other and you won’t reach your goal.

Instead understand the needs of the people in your life and work out a way to be more frugal without them having to give up the things that are most important to them.

Habit Six: Synergise Synergising is the habit of working as a team to get better results than if you were working on your own.

When you have genuine interactions with people, you’re able to gain new insights and see new approaches to your problems — ones you might not have thought of before.

Talk to people to discover new ways to do things and processes that can really help you save money. Surrounding yourself with like-minded people can help.

“Find people who are where you want to be by joining online frugal-living forums, striking up a friendship with a fellow coupon-cutter, or starting a sewing club,” writes Mr Ning. “When you’re around people with the same goals as you, you’ll be able to share ideas and learn from each other.”

Habit seven: Sharpen the saw In order to maintain all these habits and achieve any goal in life it’s important to look after yourself physically, emotionally, mentally and spiritually.

This can be done frugally too by: eating better by starting a vegetable patch; exercise frugally by going for a walk or jog; interacting socially to make you feel better emotionally; exercise your mind by reading or volunteering; and spend time close to nature and expand your spiritual self through meditation, music, art, or prayer.

Image: Feelart/ www.FreeDigitalPhotos.net