15 Dangerous Money Habits That Are Denying Your Financial Freedom
Making money can be extremely hard, but spending it is quite easy. Probably you are here because you are fed up with the self-sabotaging money habits that are keeping you from meeting your goals. Maybe you have no idea what personal finance is all about. But you are planning to achieve your dream of retiring early, owning a home or even clear that debt that is the source of your stress. You might be the cause of all the unprogressive life that you are living. What do you do to stop those counterproductive habits?
The following are some of the poor money habits you need to stop now for a secure future:
1. Dependency on Credit Cards
Are you the type who cannot leave the house without the credit cards in your wallet? Then you need to stop that habit. Cardholders tend to spend beyond their income level unconsciously. What they do not recall when swiping the card at payments points is that they are getting themselves into debts. You find a personal even hitting the credit card limit. Without even knowing, you have defaulted on payments, as your income cannot foot all that.
Develop a good habit of leaving your card behind. Only walk with enough cash in your pocket for use on purchasing. You cannot spend cash reckless, as you would use a card. After all, you can feel the real pain of buying an expensive product and having to pay in cash. You also need to understand that your credit score might get hurt if you decide to carry on with using credit cards without a thought. And if you happen to use a card, only spend what you can afford to pay. You should not even reach half of your credit limit.
2. Having No Retirement Plan
Probably you are in your early years of employment. You might be convincing yourself that there are many days ahead. You think it is too early to start saving. After all, you should enjoy life. Live life as if there is no tomorrow. But you are making a very grievous mistake. The impacts are unimaginable. What is that thing that is holding you from saving for your after-retirement days? Commit some monthly contribution to the 401(k). Open an Individual Retirement Account (IRA) with a good bank and be saving regularly. An IRA will generate interest, and this would mean more cash if allowed for a long time. If your employer has a retirement scheme, make contributions to the plan. All this will ensure that your future is secure.
3. Buying on Impulse
Impulse buying involves making purchases aimlessly and that you had no plans for. Shopping for fun can become a habit and may cripple your financial security. Get another hobby that does not involve spending cash. Stop buying things just because they are there. Even if you admire something, learn to stay without it. Stay away from stores and make friend with people who do not shop for fun.
4. Assuming Coupons and Offers
It makes economic sense to keep checking on any discounted items that you could buy at reduced prices. Manufacturers of products are always looking for a way of attracting customers and increasing sales. That is the reason why they offer the discount on the products. You don’t have to spend much buying items that you could buy at incredibly cheap cost.You can find coupons for just about any purchase whether it is a personal item, or a gift for someone else. Take a look at the savings these Guitar Center coupons can give you!
Also, you could consider checking the Internet regularly to see if there are freebies to take advantage of. Set up automatic notification, so you are among the few to know what is on offer.
5. Failure to Track Your Spending
Spending without a plan is popular. You risk exhausting your cash before the end of the month and getting into debts if you do so. Impulse buying is wrong. You need to come up with a budget to help you keep up how your money is moving. A budget is an essential document as it helps you cut on those non-essentials that you can do without. It also acts as a reminder that you do not need to engaging in money-consuming activities. A budget is not enough. You need to ensure that you stick to it. Do not be tempted to spend on something that is not in the budget. Neither should you spend more than what you have allocated.
6. Habit of Eating Out
Do you always find yourself always tempted to buy snacks and everything else edible when far away from home? That could be costing you a lot. Train yourself to stay without buying things just because you have cash in your pocket. Just ignore those eatery joints and save the money. Direct that money to the IRA or investments.
7. Too Much Fear for Risks
Do you have any investments? You do not need to fear risks. This does not mean that take your money into get-rich-quick schemes. Investments carry significant levels of risks, but that should not keep you from investing. Ensure that you save enough and invest in bonds or stocks. Start a business and see the direction it will take you. Get a business whose return is slow but guaranteed. You cannot gain anything if you do not dare to risk. Get that idea into action. It might become the next big thing. If you have no idea how to go about it, you need to seek advice from consultants.
8. Spending Retirement Benefits
You might have established a retirement plan. You have been contributing towards the 401(k), you got an IRA and are making regular payments to your employer’s pension scheme. That is cool. The problem comes in when you decide to turn to your benefits when you have an emergency. Retirement benefits are so vital that you should not even think of using it to pay your debts. Your future is crucial, and you need to do everything to protect it. Resist any urges to use the retirement savings for extra money. Otherwise, you risk facing a lot of problems after retirement.
9. Emotional Spending
You might catch yourself being low in moods. Probably there is something that is disturbing you. Are you in a relationship that has gone sour? Have you had a disagreement with your boss or friend? Do not indulge in drinking or eating to hide from the problems you are facing. If you go drinking, that will not solve the problem completely. In fact, you face double problems once you get sober, low cash and the unsolved problem.
10. Failure to Get Insured
Unexpected things do occur. You may not have control over them. But you need to be smart. Get insured so that in the case of an emergency, you are safe. If a misfortune like an illness occurs and you are not protected, you will turn to lenders for loans. Get a medical insurance and home insurance and stay safe from the repercussions of the unexpected. You do not aspire to get into debts. Secure your future with the insurance plan of your choice.
11. Paying Bills Late
If you are always rushing to make late payment of bills, then you are hurting your credit score. Maintaining a healthy credit score is essential as since you won’t face problems with trust. With a poor credit history, your mortgage loan application may not get approved. Some employers also check the credit rating when employing. Even worse, renting a house might be a challenge if your landlord decides to confirm your history. Get reminders for any payments that you need to make. There are even personal finance apps designed for that.
12. Lending Money
It is not wrong to lend money to people. Extending a helping handle is noble. But it may have critical impacts on your financial security in future if they fail to pay. Take close friends, for instance; they tend to take debts from friends lightly. If you keep following them, it means a strained relationship. You may not even have the courage to keep reminding them that they need to pay you. You want to retain good relations and hence you may not report them, so they are compelled to pay.
As proof that you are not mean or stingy, you may consider buying them a gift or helping them in non-monetary ways. Help them with ideas of making their money. Get them a financial advisor so they can learn personal finance. Doing that means solving them their problems forever. If you do such things, you won’t face any resentment, and they will take you as a friend who is ready to offer them help.
13. Buying Mediocre Items
As a consumer, you need to be rational. Think smart. Ensure that you purchase quality items that have a long lifespan. If you are tempted to buy cheap things in the name of saving, then you are doing a disservice to yourself. Cheap items get worn out fast, and you will be forced to make regular purchases. Cheap products are expensive in the long-run. Let the value of the item you are buying be the driving force and not mainly the cost. Get quality items that are more durable and save yourself the trouble of replacing or repairing them all the time.
14. Failure to Set an Emergency Fund
The future is unpredictable. Some things happen that are beyond human control. Illness, for instance, will require you to have money to settle the medical bill, consultancy fee for the doctors and maybe medicine. An emergency kitty acts as a buffer between you and loans when urgent needs arise. If you fail to create an emergency for the unforeseeable future, then it means getting into debts. You do not want that to happen to you. Open an account with a bank and get a plan for making payments towards the saving. To avoid the temptations of tapping into the emergency cash, consider opening an account that you cannot easily access.
15. Comparing Yourself to Others
Everyone has their life and life situation unique to them. Our needs are entirely different. Thus, they demand diverse approaches. Do not worry that others are leading a lavish lifestyle. Probably they are riding sleek cars because their income allows. Do not try to keep up with your neighbors or friends by buying things that strain your budget. You risk getting yourself into massive debts just because of peer influence. Get a financial plan that works for your level of income and follow it strictly. You could think of a goal that you want to achieve. It may include owning a home in 5 or 10 years, buying a car, any project. It will keep you focused knowing that you have a goal to achieve.
Acts quickly morph into habits. Habits are very hard to correct if you get hooked. But with the willpower, it is possible to change our lifestyle for the better. Make the right choices today. Shun everything that does not have a positive impact on your life. Make smart moves for the sake of your tomorrow.