Most of people have one … or several bad financial habits. These bad financial habits sometime result in some very expensive mistakes. As long as those habits are broken or at least controlled, they can have minor effect on your financial success. The first step, of course is to identifying the bad financial habits.
Here are 5 bad financial habits to avoid that keep people from getting a positive grip on their finances.
Impulse shopping happens unexpectedly sometimes. Think of shopping like alcohol. It should be done “responsibly” and can become addictive, if not careful. Make shopping a planned activity with a list or a budgeted amount. Unplanned or impulse shopping may sabotage your spending plan / budget. Also for large ticket items, take 24 to 48 hours to shop for a better deal or to figure out if the item is really wanted and affordable.
Retail therapy may make us feel good for a moment but buyer’s remorse is painful. When emotionally down, distraught or highly emotional, avoid shopping or making any large purchases. The more emotional we are, the less financially objective we become. Do something that doesn’t cost anything or very little, like going for a walk, spending time with family or friends, etc.
Overdraft protection is so convenient! However, overdraft protection makes it easier overspend. It allows debit card transaction or approves checks to go through even when there is not enough money the account for a Fee. The fee averages $35 and is charged to the account for every charge that overdraws the account, even if the amount runs as low as one dollar. Generally, it is like a very short-term loan with a ridiculously high effective interest rate. Now, was that cup of coffee really worth $40? Besides, most people spend more when they use debit cards. Use cash instead.
Savings is money set aside for a specific purpose like emergency, down payment of a house or car, school, etc. Avoid using savings for something that is outside of its purpose. The best way to do this is by establishing a savings account that is not easily accessible with a certain amount directly deposited every pay period. Savings accounts are supposed to grow, not chiseled away.
Financial Promiscuity is when multiple credit cards are used for small purchases when cash should be used. Avoid using credit to purchase that “value meal” or anything less than $50. This will ensure that Financial STDs (Substantially Tremendous Debt) are not slowly acquired.
By acknowledging bad financial habits, we can focus on stopping and changing them. Some bad financial habits may be more challenging to quit than others, but it can be done. Try replacing bad financial habits with good financial behaviors to reach financial goals faster.