Yes, we all have some good and bad money habits. Flossing, regular exercise, good night sleep are all good habits when repeated over and over again. However, there are some bad habits that can sabotage your financial health. To achieve long-term financial wealth we need to turn off the autopilot and start making some active and careful decisions about how you mange and spend your money.
Bad money habits can be extremely hard to break. They could be ingrained in us from our childhood and upbringing or from the simple lack of knowledge about personal finance. Even with the best of intentions and disciplined financial planning, there are still some habits that continue to sabotage your money success.
Here are a few ways how people mismanage their spending habits and cause havoc to your bottom line:
- Avoid all forms of emotional spending to deal with life’s ups and downs; it does not fix anything but makes things worse. Set yourself some ground rules and opt out of marketing emails from your favorite stores.
- It might be admirable to lend money to family and friends but if they cannot repay you; it might lead to conflict, resentment, and hurt your relationship.
- Picking up the check when you go for dinner or for a round of drinks might be a great source of pride, but if you are going into debt or putting off important expenses because of this, then you have gone too far.
- All debt is not equal. Simply rank your debt in order of highest to lowest interest rates and then prioritize paying off the debt with the highest interest rate first.
- If you have invested your savings in the stock market and there is market tank, don’t panic and sell. Withdrawing your money from stocks will only make you miss out on any rebound.
- Comparing and measuring success by the house your own or car you drive is a false assumptions. Keeping up with the Joneses can be tempting but you don’t know if your neighbors are living above their means.
- Incorporate a spending filter into you life when making expensive purchases. Before making those impulsive and expensive purchases, give yourself at least 24 hours before going through with the purchase. It is important to distinguish between need and desires. Taking time to evaluate your purchases also give you time to surf the internet for a better deal.
- Not monitoring you credit score can seriously hamper your plans for the future. Missing a bill can be reported and effect your credit score. Remember it takes time to clean your credit score and a bad credit score can have a huge effect and financial implication if you are looking to taking out a loan or mortgage.
- When it come to that time of year when raises are being handed out at work, don’t be afraid to ask for a raise. If you don’t ask, you don’t get, and the vast majority of people who do ask get something, whether it’s a salary bump or another type of incentive.
- After paying the monthly bills, it is up to you how to decide what to do with the money that is left over. Spending it all instead of saving and investing the remainder can become the norm. This often leads to not having a “rainy day fund” or money for emergencies. It is a good idea to save 10% of your income for retirement and aim to have at least 6 months worth of living expenses in an emergency fund.
- Combining your personal and business life is very easy but this can a major implications when it comes to tax season and cause a major headache for you and/or your accountant. Well, you accountant will get over the headache but also charge a higher fee for their time.
- Try avoid as many banking fees as possible. Banks make money from the fees they charge you and one easy charge to avoid is ATM fees. Avoid using out-of-network ATM machines and incurring higher fees. Also, think about switching banks that waive ATM fees.
- If you use credit cards to live, then it is good idea to understand exactly what you are doing with your money and how the interest on your credit cards effects you. Paying the minimum balance will only take you years to pay off the debt.
- Get rid of all those subscriptions that you don’t use. How many of you decide to join a gym this time of year with a goal to lose a few pounds but have still not gone to the gym.
- Avoid buying coffee, lunch, and snack on a daily basis. There’s no getting around it — money is irresistibly easy to spend, especially on the small stuff. Do a simple calculation, one latte a day will cost you how much per month?
- If you avoid checking you bank and credit card statements or keep track of your spending, then you are living in a money coma. Get help from a friend, family member, debt counselor, or financial planner to assess your financial situation and develop a plan for improving it.
Remember getting rich is long-tern game. Accumulating wealth is entirely up to you and keep in mind that it takes time, patience, and smart habits.