Bad Money Habits To Drop, Good Money Habits To Build
enero 8, 2023
Old habits die hard, especially bad money habits. If you find yourself with no savings and spending more money than you earn, it’s time to drop those bad spending habits and start working towards better financial habits.
Building good money habits can increase wealth and set you up for financial success. It will help you learn how to budget, save money, and work towards your financial goals.
Of course, breaking bad habits and starting new ones doesn’t happen overnight. However, with persistence and know-how, you can start transitioning to better money habits.
Why bad money habits set you up for failure
It’s vital to stop bad money habits as soon as possible. Bad money habits can prevent you from reaching your financial goals and set you up for failure.
Not budgeting your money, having bad spending habits, and not saving money can leave you vulnerable to unexpected emergencies and leave you living paycheck to paycheck—not to mention no money for retirement. As you can see, bad financial habits can wreck your financial future.
Bad money habits to drop
Are you aware of what your bad money habits are? Check out these bad spending habits to quit now so you can start being smart about your money!
Racking up credit card debt
Ah, those magic plastic cards that make it all too easy to buy that luxury handbag you’ve been dying to have. Racking up credit card debt is one of the most expensive bad money habits you can have.
Are you one of the average Americans with a credit card balance over $6,000? High-interest credit cards can cost you hundreds to thousands of dollars in interest.
Having high balances on your credit cards can also damage your credit score. To avoid wasting money in interest, be sure to pay your balance in full every month. This prevents debt and saves you a ton of money.
Shopping when you’re bored
Back in the day, it was known as the home shopping network syndrome, aka shopping late at night when you’re half-awake and bored. You’d call and order these pretty trinkets or whatever your weakness was.
Thanks to online shopping, it’s much too easy to shop when you’re bored. Shopping due to boredom is a terrible financial habit that racks up debt if you’re not careful. Try to combat shopping with these productive things to do instead.
All those goodies beautifully displayed in the checkout line aren’t by mistake. This is a retail tactic to get you to spend more money before you leave the store. Impulse purchases add up quickly and can cause you to run out of money fast.
Let’s say your impulse purchases are $100 a month; that adds up to $1200 a year! Learn how to stop shopping to drop this bad habit for good.
Shopping for status
Do you buy things because you are trying to impress other people? Sometimes it’s easy to get caught up in celebrity fashion and desire to impress people with the things you have.
However, shopping for status is not the way to find real friends and leads to financial disaster. Remember, you should always be authentically you, and you don’t need to impress anyone with what you own.
15 good money habits to build
Now that you know what money habits to drop, check out these 15 financial habits to start now.
1. Get on a budget
One of the first good money habits to start is to get on a budget. A budget will help you manage your money successfully. Budgeting helps you pay your bills on time, build wealth by saving, and prevent financial mishaps.
There are a variety of budgeting tools and methods to help you create your budget. The key to overcoming budgeting challenges is picking a budget method that is best for you.
2. Live below your means
One of the best money habits you can develop is to live below your means. Living below your means can help you build your savings account faster and help you learn your needs vs. your wants to prevent bad spending habits.
Living a frugal lifestyle may seem challenging, but you’d be surprised how much money you will save by even small lifestyle adjustments.
Simple changes in your spending habits such as couponing, purchasing pre-owned vs. new, and ditching cable can make a huge impact on your wallet.
3. Pay off debt
One of the most important things to do when building good money habits is to pay off your debt. Debt is not only expensive but has damaging emotional effects.
You may feel like you are out at sea with no life raft, but with the right debt payoff strategy, you can free yourself from the burden of being in debt. By paying off your debt, you can start saving more money and secure your financial future.
4. Automate your finances
Simplify your life a bit and ensure your bills are getting paid on time by automating your finances. You can set up automatic bill pay and even have money automatically transferred to your savings accounts. You still need to regularly review your finances, but this is a great way to take control of your money.
5. Build your emergency fund
Not having money to pay for emergencies such as a broken-down car, home repairs, or an unexpected job loss is one of the worse feelings in the world. Bulking up your emergency fund is one of the best money moves you can make.
The goal is to save 3-6 months of essential living expenses to cover unexpected events. Overwhelmed with the amount you need? You can start by saving $1,000 and build from there.
6. Grow your money by investing
To grow your money and build real wealth, you need to start investing. Investing your money can increase your income and secure your financial future.
You don’t need a ton of money to get started investing. You can learn everything you need about investing with our book, “Grow Your Money, Learn How Investing Works.”
7. Get the right insurance
Not being adequately insured can cause major out-of-pocket costs. Getting the right insurance can protect your income and assets.
Of course, the type of insurance policy you need depends on your situation. Check out these 9 types of insurance you need but may not have.
8. Review your bank statements
Bank account fraud is abundant, and reviewing your bank statements can help you catch unauthorized transactions quickly.
Keeping a close eye on your money ensures nothing slips through and helps you see your spending habits as well. Make reviewing your bank statements monthly one of your new financial habits.
9. Increase your deductions
If you are enrolled in a 401k, try to increase your deductions as much as possible. This can build up your retirement savings quickly and also reduce your taxable income.
Make a goal to increase your deductions to the maximum amount your employer will match; this is like getting free money put right into your pocket!
10. Track your expenses
Balancing a checkbook may seem to be a thing of the past but it’s crucial that you track your expenses even though you may not write checks anymore.
Keeping a spending journal or register will keep you on track financially and prevent money mishaps such as over-drafting your account.
11. Pay yourself first
An excellent way to save money fast is to pay yourself first. This means you pay yourself by saving money before you spend any money.
For example, when you get paid, you will put aside a set amount or percentage and deposit it into your savings. This way, you save first and spend later. This is an essential money habit to build because you are putting your financial goals first.
12. Pay your bills early
It’s easy to slip up and pay bills late here and there, but late fees add up and are a waste of money. Do yourself a favour, and rather than paying your bills on the due date, pay them early. This will prevent you from forgetting and racking up late fees. Make it a goal to pay a bill as soon as you get it.
13. Create a financial plan
To reach a destination, you have to know where you’re going. The same goes when it comes to your financial future. Creating a financial plan will help you map out your goals and take action to achieve them. Include short-term and long-term financial goals in your plan to help achieve them faster.
For example, a short-term goal would be to save for a vacation and a long-term goal would be paying off your mortgage. Break your long-term goals down into smaller goals in order to accomplish them easier.
14. Cut expenses
It’s time to trim the fat, so to speak. Cutting unnecessary expenses can save you a bundle every month. Cancel subscriptions, ditch cable, reduce your electric bill, and stop overspending. Even small expenses add up over time, and by cutting them out, you can save money for something you truly want—like a vacation.
15. Be a savvy shopper
Did you know you can save up to 40% off retail prices by shopping second-hand? Buying items such as electronics, jewellery, and clothing used can save you hundreds to thousands of dollars every year.
Shop sales and clearance racks to save money at retailers, and don’t forget to coupon and use cash-back apps to increase your savings!
Get started with a money-savings challenge
It can be hard to get motivated to break bad habits and start good ones. However, if you make something fun, it can help take the pressure off and help you stick to it.
Try a money-savings challenge to get started building your good money habits. A money challenge is a fun way to save money and also can bulk up your bank account fast!
Building good money habits lead to financial success
When you embrace good money habits, you set yourself up for financial success. Planning for your future, saving money, and staying on top of your finances will lead you to the financial freedom you desire.
And you’ll be prepared for those unexpected expenses, avoid penalties and late fees, and have money for a wonderful retirement.
As you build good money habits, you will quickly see your bank account grow and how it will lead you to financial success.
Dropping bad spending habits may take some time to adjust to but is essential to your financial freedom.
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