5 Money Habits Causing Financial Uncertainty
Money habits can be the reason you fall into financial uncertainty. Do you ever keep track of how much you spend and where you spend it? Have you noticed a pattern in your spending?
Bad money habits can happen to anyone, especially myself. One year I spent a total of $600 dollars at Starbucks just on my credit card, which does not include the times I paid in cash. I could have saved that money for something more important than an iced caramel macchiato three to four times a week.
“The strongest thing in the world is a bad habit.” —Terri Guillemets
So what is a money habit?
According to the Google Dictionary, a habit is “A settled or regular tendency or practice, especially one that is hard to give up”. Habits are done subconsciously. Sometimes they occur just by routine and sometimes they can be adopted from those around us. We all have a habit or two that we practice in our day to day lives. Money habits is a regular routine of how someone handles their finances.
A few bad financial habits include,
- Failing to Budget
- Paying for Unused Subscriptions
- Overusing the Credit Card
- Impulse Buying
- Emotional Spending
Failing to budget
Are you following a personal budgeting plan? A personal budget plan is the most common way to manage your money. Not having a budget can make it hard to save for the unexpected. It can also make it hard for some people to have enough for their expected monthly bills.
There is a lot to know about how to create and implement a budgeting plan. Most people forget about their habits when creating their budgeting plan. It’s important to take inventory of everything regarding your income and spending to create a realistic budget.
When you are creating a budget make sure to add up all of your income and expenses. Make sure to include the random trips you make for fun. We all spend money on things we don’t need.
For a step by step guide to creating a budget click here!
Paying for Unused Subscriptions
Do you know the amount of money you are spending on subscriptions each month? Paying for unused subscriptions happens a lot to many people. We get in the habit of subscribing to random items and forget all about them. Not keeping track of our personal finances (income and expenses) can make it hard to stay on top of your budgeting plan.
Make sure to add up all of your subscriptions and include them into your budgeting plan and cancel them if they are no longer needed!
Overusing the Credit Card
Another bad habit that people adopt is overusing credit cards. A credit card is a nice thing to have for many reasons. It can help your credit score and make you look good to other lenders when applying for a mortgage or a new car.
A credit card should be used consistently each month and paid off in full each month. However, accruing credit card debt can have a negative impact on your financial situation.
There are many reasons why a credit card becomes overused such as when our budgets increase, we face unexpected hardships, we become more comfortable with owning a credit card, and so many other reasons. Overusing a credit card can easily become a habit that is hard to break. Spending more money every month and not being able to pay it off in full can cause you to fall into debt and make it hard to qualify for other loans.
Check out The Math Behind the Minimum: Calculating the true cost of credit card minimum payments, for a deeper understanding of making credit card minimum payments.
Impulse buying is something we have all done at least once in our lives. You buy those $200 dollar shoes knowing that you did not need them. Impulse buying is okay to do every now and then. However, when it is a constant action it can result in financial hardship.
Impulse buying can lead to deeper spending habits such as taking money out of your savings or checking accounts and not having enough money left for paying your bills.
A good way to build successful money management habits is to create a budget plan. You should review the budget plan each month or as often as things change. If you know you make impulse buys, you can create an impulse buy savings account.
Do you find yourself going shopping when something bad happens or you have just had a bad day? A common way that most people deal with stress, anxiety, or depression is by spending money on things that make them happy. This action is known as emotional spending.
Sometimes when we feel sad, buying a new blanket or new shoes makes us feel better. However, emotional spending can become a bad habit long term.
Just like impulse buying, emotional spending is typically not included in our budgeting plan. We often use our savings or money that should be going to a main bill. This habit can cause financial problems in the long run because you are using money you do not have. Try to add a specific amount into your budgeting plan for emotional spending, just in case it is something you tend to do often.
Building better money habits that lead to financial success!
By adopting better money habits you are creating a path to financial success. Here are some good money habits you can learn to reach your financial goals,
- Create a goal
- Create a budget
- Auto Transfer money into your savings account (make sure to make it a reasonable amount).
- Plan out your shopping trips (create a list and stick to it).
- Keep track of your financial process!
- Speak with a financial advisor
Building good money habits does not happen overnight. Even small changes can make a difference. Changing your bad money habits will take some time, but implementing good money habits in your day to day life is a great way to start!
Learn how to create good money management habits today!