Bad Money Habits and How to Break Them – In the following article, we will share with you some habits that are preventing you from saving a lot of money.
8 Bad Money Habits and How to Break Them
1. Not budgeting
Not having a budget in place makes it harder to stay afloat financially, let alone get ahead. A budget allows you to see how much money you’re bringing in and how you’re spending it. It allows you to make changes that help you save more. Budgeting doesn’t have to be a huge undertaking. You can always start by only carrying a small amount of cash with you every day. Also using a system like an envelope budgeting, helps you put aside money for paying bills automatically. Some programs even track your spending automatically.
All you have to do is check the dashboard each day to ensure you’re staying on track and making adjustments as needed. Tracking your costs and creating a budget every month is one of the best ways to increase your savings. By doing this, you can see where your money is going and set attainable goals without completely compromising your lifestyle. You just have to distinguish between your needs and your wants.
2. Relying on credit cards
Unless you’re able to pay off the balance in full each month, using credit cards is one of the worst things that you can do for your finances, especially if you’re using them to live beyond your means. Every dollar you put on a card will cost you many times more in interest charges if you don’t pay the card in full each month. You could end up spending years and thousands of dollars paying down purchases you don’t even remember making. You wouldn’t want that, would you?
Relying on credit cards comes with a risk. The idea is for a consumer to pay off the balance in full each month, but with credit limits mostly being way higher than a monthly spending budget, it becomes easy to spend more than intended and find yourself piling up debt. Using your credit all the time creates a cycle where you’re constantly swiping your card, you fail to pay it off in full at the end of the month and carry over debt to the next month. You start to rack up interest on the unpaid balance and on top of that, the stress of not knowing when it will be fully paid.
So how are you supposed to come up with spending money, while juggling credit card payment and trying to save at the same time? If you’re always trying to keep up with the bill, it can be hard trying to figure out how to ease your way back into spending the money you actually have, but not impossible.
3. Buying impulsively
An impulse purchase is an unplanned purchase of a product or service which is usually influenced by our emotions. Retailers and marketers are well aware of this, and it’s for this reason that you’ll see small items like candy and magazines at the check-out counter. These marketers know that as you wait to be checked out, you’ll feel the need to purchase something on impulse.
One thing about impulse buyers is that they don’t want to miss out on a sale. When they see something they want, they waste no time taking it, even when they aren’t sure whether they have enough money or whether they really need it. To try and curb this habit, be able to recognize when you’re doing this. When you reach out for that bar of chocolate at the check-out, force yourself to wait. First, consider whether you have extra cash on you and whether you need it. If you do this, you’ll get the chance to think about your decisions, and chances are you’ll realize that you don’t even need it after all.
4. Making excuses
Have you ever stopped to think that maybe your attitude is what’s keeping you from saving? Coming up with reasons that are holding you back is easy, but they are only mental roadblocks getting in the way of you having a secure financial future. Try changing how you view your financial priorities so you can concentrate on what actually gets you to your goals.
Saving money can be easier if you deal with the financial excuses that you tell yourself. It’s true that saving money for retirement or anything else can seem like a lot of hard work, but you need to be disciplined and motivated to make it happen. But you first have to do away with the excuses you tell yourself for why saving is something that just can’t happen for you. We’ve all at some point been tempted to drag these excuses out, but the sooner we take control and stop making excuses, the sooner we can start to save money. To some extent, your future depends on it.
To remind you of some of the excuses you may have made at some point, here are some of the most common excuses that people make about money. I can’t afford it. There’s plenty of time to save. I’ll retire on social security. I’ll have an inheritance. I’ll invest when the market is right. I’ll save once the kids flee the nest. And so many others.
The spending comes easily to many of us, but learning how to save can help much more in the long run. One reason saving money seems more difficult is because of all the necessary expenses you incur like rent or mortgage payments, food, and so on. But sometimes, it’s just the everyday habits and attitudes that may be keeping you from reaching your saving goals.
5. Refusing to cut back
When money seems to slip away from you, for many it seems only natural to look for a better job or another hustle on the side. And of course, there’s nothing wrong with this, but sometimes the real issue at hand is not how much money you make, but how much you spend. If you’re not ready and willing to cut costs so as to boost your savings, you’ll most likely fail to see consistent growth in the savings department. So in order to have a nest egg of some sort, you might need to break your habits of spending lavishly and cut back on your expenses a little bit.
So how does one go about his? There are quite a number of ways to cut down your expenses and save money, you just have to know where to look. For one, you could create a more frugal budget and stick to it. You could also save on utility costs, go for cheaper housing options, eat at home, update your subscriptions, and switch to cash only. You could also ignore sales, switch to generic products or do yourself some of the things you currently pay others to do. You don’t have to wait or think too hard about it. Get started as soon as you can and be amazed at how much you can save by cutting back a little.
6. Making convenience purchases
A convenience purchase can be nice every once in a while. It can also be a necessary exception if you’re in a great hurry. Convenience purchases are routine and take little thought. But if you find yourself making frequent convenient purchases, the convenience will at some point cost you.
To stop having to get fast food every day, you could make a few basic meals in bulk that you can enjoy throughout the week. You could also stop buying that overpriced espresso on the way to work by waking up a few minutes earlier to make a cup. A little extra work on your part could end up saving you significantly.
7. Not being prepared
You may not always be able to predict what will happen to you or the costs that you’ll have to incur in the future. The money that you put away for savings may have to be used for an unexpected expense. Having an emergency fund separate from your savings will help in the case of an emergency. Every little bit helps but it’s good to work toward having about three to nine months’ worth of expenses in your emergency fund. It helps ensure you don’t go into debt when something unexpected arises.
Although you might want to clear off the debts you already have as soon as possible, prioritizing emergency savings is important, even a small amount that can be useful when an unexpected expense comes up. Without any savings to lean back on during times of crisis, you may feel the need to turn to high-interest credit cards or personal loans to cover out-of-the-blue costs. However, doing so only compounds your debt and makes the situation worse.
It’s wise to have at least six months’ worth of expenses saved up in an emergency fund, but this becomes hard when you have debt or struggling financially. If saving for half a year is a bit of a challenge, try saving for three months instead. Having a little money set aside for emergencies is better than not having anything at all. And once you’ve decreased your debt you could always work on building your savings.
8. Accumulating a lot of debt
If your debt load is drowning your potential savings, you’ll likely stay in the red for a long time. The moment you’ve set up a reasonable emergency fund, it’s a good idea to aggressively tackle your debt. Whether you decide to pay off the highest interest rate debts first or pay down the smallest balances first, it’s important to commit to paying it all off.
The sooner you free yourself of debt, the more money you free up to meet your savings goals. It’s important to note that your individual debt repayment strategy will vary based on what type of debt you have. Regardless of what kind of debt you owe, there are two common strategies for repayment: the snowball method and the avalanche method. Both will ultimately help you reach debt-free living but in slightly different ways. The snowball method consists of listing your debts by total amount and paying off the smallest ones first, slowly working your way up to the most expensive.
This strategy focuses more on the psychological benefits of paying off debt, and many people find it satisfying to pay small amounts first as it’s highly motivational and helps lessen the emotional burden of debt. With the avalanche method, you arrange your loans in order of interest rates, rather than by the total amount. Then you focus on paying off the balances with the highest interest rates first while continuing to pay the minimum each month on all other loans.
This can be particularly helpful if you have credit card debt in addition to student loans or other types of loans, as interest rates are typically higher on credit card accounts. Whichever strategy you choose, try to make payments beyond the minimum each month. One simple trick is to set aside money that is unexpected, maybe a Christmas bonus or a birthday gift from a family member, for debt payments. This also works when you spend less on groceries than you anticipated or maybe have the extra money in your monthly budget.
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