Anyone can have financial troubles. They can stem from unexpected or unplanned expenses that can occur throughout your lifetime. Or more commonly, they may stem from bad money habits.
Whatever the reason for your bad money habits, one thing is for sure: they won’t help lead you to a financially secure life and they won’t help you reach your financial goals.
Often, we may not even realise the habits that are holding us back and these bad habits can be tough to break. The first step to breaking your bad financial habits is acknowledging them. Only then can you work towards correcting them.
So what are the common bad financial habits that you could be guilty of?
Improper use of your credit cards
One sure way to find yourself in debt! Credit cards can come in very handy when you’re in a tight spot however racking up credit card debt is an expensive money habit. Keep in mind that your card is best used for establishing credit, emergency purchases, and even to get special rewards such as travel points or cashback. However, there is one key rule to follow when you decide to start using your card: spend only what you can afford to pay off each and every month.
If you don't pay your card balance in full each month, every dollar you put on a card will result in high interest charges. You could end up spending years of your life and hundreds of thousands of dollars paying a much higher price for purchases you may not even remember making. Improper credit card usage can siphon money from your savings, damage your credit score and in the worst case scenario, even lead to a bankruptcy.
Not creating or sticking to a budget
A budget allows you to have a full understanding of your money so you can see what you have coming in and where it’s all going. It also helps you to easily plan or cut your expenses to help achieve your financial goals. Without a budget, you can end up overspending (even more than you earn), putting yourself in debt. It also makes you less able to navigate any unexpected expenses/emergencies and can leave you scrambling to pay your bills.
Budgeting may not sound like fun, but you can never be in control of your finances without making a budget for yourself. It is the best way to help prevent debt and reach your financial goals so it’s important to make a realistic budget and stick to it. Once your budget is formulated, discipline is the key to making sure it works.
Impulse Buying
What is it? It’s when you purchase something you had no plan to - purchases made in split-second decisions. While one or two such purchases probably isn’t an issue, making a habit of it can badly affect your finances. If you’re trying to save yet find it difficult to resist the urge to make spur of the moment purchases, you could be going backwards!
This kind of shopping makes room for other bad habits such as losing sight of your budget and unnecessary use of credit cards. If you’re prone to big budget or frequent impulse spending sprees, you’ll need to formulate a plan that helps you manage the itch.
Ignoring Your Debt
It can be a scary thing knowing how much money you owe. So much so that some people try to ignore their debts. They may avoid phone calls from creditors and collection agencies and ignore their bills/statements because they dread what they’ll see.
This happens a lot more than you might think! But pretending your debt doesn’t exist doesn’t help. Your denial causes even more damage. This behavior just causes more late fees and interest charges, and plunges you even deeper into debt.
The truth is that you need to know exactly how much you owe so you can include payment plans for each debt in your budget. Only then can you tackle the issue head-on.
Now that you know your bad money habits...
Bad money habits can completely wreck your financial plans and leave you broke. Once you’ve pinpointed them, no need to panic! There’s always a solution.
Remember, breaking your bad money habits and replacing them with good ones won’t happen overnight. Your future is in your hands, so you need to be willing to do the work to improve your financial situation. Know that it takes practice, patience, and discipline to truly nip the issue in the bud but the sooner you put a plan into action, the better. Once that’s done, you’ll notice your rewards soon enough.