The material presented here is for educational purposes only and is not intended to be used as financial, investment, or legal advice.
Turn These 5 Bad Money Habits into Better Ones
Bad money habits like impulse buying, high utilization of credit cards and not budgeting can put us in excessive debt and keep us from achieving our dreams. To secure a less stressful financial future and achieve your monetary goals, get into these five better money habits.
The phrase “force of habit” means we do something because we have always done it, rather than because we have carefully considered it. Sometimes these forces of habit are harmless, like letting the phone ring at least twice before answering it or turning down the car stereo when we’re looking for our destination. But when it comes to our finances, the force of our habits can have major and long-lasting effects. Habits like impulse buying and overusing credit cards can cost us hundreds or thousands of dollars, especially over a long period of time. One day we’re living in the moment; the next, we’re drowning in debt.
But it doesn’t have to be that way. By monitoring your monetary decisions, you can build a solid foundation for a comfortable financial future. Here are five bad money habits you can ditch and replace with better money habits.
1. Stop Impulse Buying and Start a Fun Fund
Those discount items and convenience snacks near store registers aren’t there by accident. Retailers know that shoppers will often grab “just one more thing” on their way out — especially if it looks like a good deal. When you see something you want right away, ask yourself these five questions and consider if you truly need it and whether you can afford it.
If stopping the shopping seems impossible, designate a set amount for impulse buying each week or month and don’t go over that amount. Limiting convenience purchases like fast food and coffee shop lattes while making more meals and coffee at home (fancy if it must be) adds up to more money in your pocket.
2. Stop Breaking Your Bank and Start Budgeting
Do you always know where your money goes? In this digital age, paper budgets might seem like an ancient relic, but keeping track of how much money you’re making versus how much you’re spending doesn’t have to be archaic or hair-tearing hard. Because (you guessed it!) there’s an app for that.
Your bank or credit union may have an app with an online budget and tracking feature you can use to manage what you’re spending and allocate money for different things: savings, retirement, an emergency fund, or big financial goals like buying a home or a new car. Creating a budget might seem like a headache, but overcoming the roadblocks to making a budget will help you not only keep up financially but also get ahead.
3. Charge Less, Debit More
Using credit cards to live above your means or relying on them to pay bills can leave you trying to dig out of a very deep hole at worst, or at best, living paycheck to paycheck. If you continue to carry high balances, you’ll pay more money in interest than necessary.
One of the biggest better money habits you can have is to use your debit card when you can. This way, you’re mainly spending money you already have. Including your debit card in your digital wallet and on your payment apps can help you avoid charging purchases to credit cards.
4. Stop Settling and Start Learning About Personal Finances
Economist Alan Greenspan said, “The number one problem in today’s generation and economy is the lack of financial literacy.” Building better money habits starts with learning enough about personal finance to make responsible money decisions. Discovering your money mindset and being aware of your attitude towards money is an important first step.
Find podcasts, books or programs that will inform and empower your financial freedom and wellness. When it comes to choosing a bank or credit union, a phone plan, insurance, etc., shopping around for the best rates, customer service and programs instead of settling for the first offer you see can save you a lot of money and hassle in the long run.
5. Stop “Winging It” and Start Setting Financial Goals
If you don’t have a goal, you can’t reach it. Set some short-, medium-, and long-term goals for your career, income, purchases and experiences. Whether you want to pay down some of your debt, buy a car or a house, sail the seven seas or retire early, having a money goal can help you be more financially responsible.
Breaking bad money habits and replacing them with better money habits takes some planning and practice, but once you do it, your knowledge will grow over time and you’ll set yourself up for financial success.