Everybody has their share of bad habits, and financial ones can often be the hardest to identify. Fortunately, once identified, bad money habits can be combated and kicked with a healthy dose of self-discipline. Here are some tips to overcome a few common bad financial habits:
Burning a Hole in Your Pocket
A common financial ailment is not saving a cent of your earnings. In fact, 1 in 4 Americans has no savings at all. For some people, it is extremely hard to not spend the cash if it’s there, which makes it very difficult for to save money. There are a few ways to fight this problem:
- Set up Automatic Transfers to Your Savings Account. By arranging this automatic transfer, you eliminate the need to initiate the transfer yourself, which prevents you from seeing the money and being tempted to use it rather than save it.
- Limit Your Cash. Instead of literally keeping money in your pocket, limit your access to cash. By keeping the amount of physical money you carry to a minimum, you can prevent yourself from splurging on unnecessary expenses and you’ll be able to track your spending online on your online banking site.
- Create a Budget. Design a budget based on your income and expenses and stick to it. To help remind yourself to practice this self-discipline, print out your budget and put it by your desk or on your fridge. You can also put reminders on your phone or computer to help keep you motivated.
Overusing Credit Cards
Because of the nature of credit cards, it’s easy to forget that using one does equate to spending actual money. That forgetfulness can lead to high credit card balances that accrue excessive interest and lead to higher payments and levels of debt. Here are some ways to combat this issue:
- Get Prepaid Cards or Cards With Low Limits. Instead of getting or keeping a card with a limit of several thousand dollars, get ones that are either prepaid or have tight limits. It prevents unnecessary spending.
- Only Use Credit Cards for Specific Expenses. Instead of using cards for gifts or luxuries, only use them for necessary expenses like groceries or gas, which you should already have budgeted for. This allows you to keep low balances and be able to pay off said balances more easily.
- Pay Balances in Full. Some cards, like AMEX, require full balance payments, but you can also choose to make that a habit. By committing to paying balances in full every month, you force yourself to keep your spending within your budget and you won’t waste money on interest.
Keeping Up With the Joneses
The Joneses are broke. Is flaunting wealth worth sacrificing your financial security? Absolutely not. Instead of trying to match your lifestyle to your neighbors or your friends, decide what is right for yourself by creating a personalized budget based on your income, financial plan, and necessary expenses. While it’s nice to own nice things and treat yourself when it’s appropriate, make sure you’re not comparing yourself to anyone else and do what’s right for you!
Paying for Everyone
Everyone wants to be popular among friends and coworkers, which can lead people to feel obligated to pay for group dinners, drinks, and similar occasions. While for special events and occasions this is a great gesture, it becomes costly when it’s a weekly splurge. Aside from hurting the pocket, it can blur the lines between real friends and those that are along for the free ride. How do you stop this one? Simply quit buying for everyone. As long as you continue to pay for yourself, no one will think any less of you for being fiscally responsible.