Your financial security is not entirely in your hands. As we’ve just experienced, global disruptions can occur and topple everyone’s financial plans. Nevertheless, you do have control in certain areas, and one of these is your money habits. Habits are behavior patterns that you repeat every day, often without thinking. Researchers say that habits govern around 40% of our daily behavior. Your money habits affect your financial security. So, here are six bad money habits you should drop today.
Living on Auto-Pilot: No Budget
Creating and following a budget is not one of the most enjoyable tasks, but without a budget, you’ll never achieve financial security. The budgeting process helps you identify how much money comes in each month and how much goes out. Additionally, budgeting enables you to set financial priorities, such as retirement and emergency savings goals, and life goals, such as vacationing, buying a home, returning to school, or starting a business.
Not Tracking Your Spending
Do you often find yourself at the end of the month asking yourself, “where did all the money go?” Not tracking your spending is one bad money habit you want to kick out the door as soon as possible. When you track your spending, you’ll get a real-time snapshot of where you might be wasting money. Furthermore, tracking your spending is the only way you’ll know if your budget is realistic.
Living Above Your Means
One of the benefits of budgeting, as mentioned above, is that you’ll know exactly how much money comes into your hands each month. At the same time, there are many temptations, especially if you like entertaining or going on vacations. The concept of “house rich and money poor” is an excellent example of living above your means. You may have a great house, but you can’t pay the bills.
Not Saving for Emergencies
Neglecting your emergency savings account is a bad habit you want to change. It can be challenging, especially if your income is low. Still, emergencies arise, and if you haven’t saved for them, you’ll need to depend on your credit card. That emergency expense could trap you in debt for a long time. Experts suggest that you set aside three to six months of your living expenses to cover emergencies. The most important thing is to make it a priority and save as much as you can.
Making Purchases Without Checking Prices
The supermarket is one of those places where you may be tempted to get in and out as quickly as possible. But, if you’re in the habit of simply putting items into your cart without checking the price, you’re losing out on an opportunity to reduce your monthly grocery bills. Developing a habit of shopping around and comparing prices reduces your expenses, so you have more money to put toward your goals.
Paying Bills Late
Paying your bills late is one of the most common bad money habits you should break today. Your payment history comprises 35% of your credit score. There may be times when you’re unable to pay on time but routinely paying your bills after the due date will drag down your credit score and cost you money. If you have trouble remembering to pay your bills, set them up for automatic deduction or download an app that alerts you. Paying your bills on time is the easiest way to maintain a good credit score.
We develop our habits over time, and many are rooted in our childhood experiences. Bad money habits, such as not budgeting or tracking your money, living beyond your means, and paying bills late, rob you of the money you need to fund your life goals. But habits are not permanent; you can kick out the bad ones and adopt good money habits that help you achieve financial freedom.