Bad Financial Habits Are Hard To Break
Habits provide a structure to your daily life. Hence, they subconsciously become a part of your life – often, without your realizing it. Some habits are good, while others are not. Once developed, however, habits can be very hard to break. Surprisingly, however, people often fail to consider certain habits that play a significant role in their lives. These habits are financial habits, which relate to the manner in which you manage your finances. Many people do not realize that being aware of their financial habits – especially the bad ones, could be significant. It could mean the difference between being financially secure or struggling with an uncertain future.
Habitually Inclined – The Numbers Behind Financial Behavior Patterns
In March 2014, the National Foundation for Credit Counseling (NFCC) commissioned its 2014 Financial Literacy Survey. The survey covered over two thousand American adults. It found that:
- About 61 percent of American adults did not have a budget
- One in three US adults carried an outstanding balance on their credit card each month
- About 16 percent of US adults had insufficient savings for dealing with emergencies
- Nearly one-third of US adults (32 percent) did not save any portion of their annual income for their retirement
- Nearly two-thirds of US adults (65 percent) had not reviewed their credit reports in the last 12 months
These statistics reveal that people:
- Lack budgeting skills, which makes them spend more than they should
- Do not save as much as they should – for long-term priorities or emergencies
- Remain clueless about how carrying credit card balances makes them pay more than they need to
- Do not consider it important to monitor their credit reports for removing factual inaccuracies
Each of these is a bad financial habit. Collectively, these habits increase your expenses – making you spend more than is necessary. Consequently, this leaves you with lesser money to manage your other necessary expenses.
Make Fiscal Fitness A Way of Life – Eight Bad Financial Habits You Must Avoid
If you want to be financially secure, consider adopting the eight tips given below.
- Not Paying Your Bills on Time: Paying bills online does not take more than a few minutes of your time. Therefore, pay your bills the moment you get them. You could spare yourself the trouble of fretting over which bills to pay as the due date approaches. You will also avoid paying more than you need to by way of fines, late fees etc. This also means that you can save more money than you currently do. If you’re living paycheck to paycheck, consider setting reminders for bills you need to pay. Alternatively, set up an automated payment facility to pay bills. As a last resort, you could even put the cash into different envelopes for various bill payments. Then, use the remainder for all your other needs.
- Using Plastic As Opposed to Cash: Paying by credit card is a modern convenience. However, people tend to spend more when they pay by card – especially in malls. Therefore, when you go shopping, leave your card at home.
- “Urge to Splurge”: When you visit the mall, you tend to buy more than what you need. Therefore, carry a list of items that you need to purchase. Do not carry a card with you. At the mall, only purchase the items on your list.
- Not Maintaining the Minimum Balance in Your Account: If you keep withdrawing money from your bank account, the chances are that you would end up having insufficient funds in the account. Banks levy a fee for insufficient funds. Assume that your bank levies $30 for each month that you fail to meet the minimum balance of your account. In addition, assume that you fail to meet the minimum balance thrice in the year. This means that you would pay your bank $90. You could avoid paying these excess charges quite easily. The lesser you spend, the more money you would have in your pocket.
- Never Paying Yourself: If you’re constantly waiting for your next paycheck, it’s a sign that your expenses exceed your earnings. At this rate, you would probably have no money left for your savings. Therefore, deduct a specific amount (say $50) from each paycheck you get. If you receive payments fortnightly, you would save $1,200 by the end of the year. You could also set up an auto debit that deducts a specific amount from your account and places it in a savings account. This would ensure that you are saving something each month toward your retirement or future goals.
- Keeping An Outstanding Card Balance Each Month: Avoid the temptation to pay the minimum amount due on your card. Instead, pay the entire outstanding balance each month. This would not only look good on your credit report. It would also reduce the amount you have to pay an interest or late fees. Remember that an outstanding balance on your card at the end of each month is the first step toward accumulating a credit card debt. If left unchecked, this could spiral out of control very easily.
- Unnecessary Expenses: If you purchase your lunch from the cafeteria each day, consider taking your lunch from home. Reduce those little expenses like chewing gum, aerated drinks, cigarettes, coffees etc. Individually, they might seem innocuous enough. However, they all add up to a significant amount at the end of the month.
- Buying Things You Never Use: Don’t pay a fortune for that gym membership when you know that you will not be using it. Consider running or walking each day to get into shape, that too, without spending money. Similarly, if you don’t watch television each day, don’t purchase the premium package. Curb these wasteful expenses. After all, every dollar saved is a dollar earned.
Tips
Spending your hard earned cash is always an easy thing to do, but what happens when you don't have enough of it to spend or you are accustomed to a higher level of living that your income doesn't cover? Well, you need to make an extra income, be it through a second job or learning to invest correctly.
Read these really great articles on the basics of investing the right way and start making your money work for you.
Noted author Suze Orman said, “People have got to learn: if they don't have cookies in the cookie jar, they can't eat cookies. The only way you will ever permanently take control of your financial life is to dig deep and fix the root problem.” Habits are one of the pillars of life. If good, they will be beneficial. If bad, they will result in a variety of problems. Everyone aspires to lead a life free from financial difficulty. However, not everyone is able to get there. Therefore, examine your attitude toward money. If you don’t have enough, the chances are high that you’re not making the optimal use of what you have.
