Like countless other people, you’ve probably driven yourself into financial difficulties at some time or another, smacked yourself on the forehead, and given yourself an ancient piece of advice: “spend less, save more”. Although it sounds wonderfully simple, developing and maintaining good financial habits isn’t always easy. Among adults, it can often be caused by toxic, self-destructive money habits which are holding you back. If you never seem to have enough money to throw around, despite having a steady job and a few healthy assets, then you may be guilty of some of these bad habits. Here’s a list of some of the ones which will spell disaster later down the line.
Having No Plan
Spending the money you earn with no kind of budget or plan in place is going to cause a massive blow to your financial stability in the future. If you want to hit your planned retirement date, you need to be living with a budget and sticking to it religiously. Sure, you might make the necessary bills on time and put food on the table. But what about savings, your kids’ education, your plans for retirement and so on? You need to keep close tabs on every last cent; where it goes and what it does for you in the long run. If you fail to do this, impulse buying and selfishness can get in the way, and your dollars will repeatedly end up in places other than your retirement fund and savings! Having a loose idea of what your day-to-day life costs isn’t enough. You need to ensure you have a clear, solid figure in mind at all times. If you don’t do this, you’ll repeatedly be taken by surprise by expenses that you should have known were coming, but didn’t think about. Your budget shouldn’t just be something that covers the usual monthly expenses; groceries, utilities and so forth. You also need to be looking ahead at the expenses you pay annually, like home and car insurance. It may not be fun, but take some time to determine your yearly bill, divide this by 12, and have a monthly date for accounting for your once-a-year expenses. This way, you’ll be able to get by with some degree of certainty that you’ll be able to pay these kinds of expenses when they’re due. When you take a look at your current and past spending habits, it can be a pretty nasty shock. Don’t panic though! There’s always time to turn things around.
As I’m sure you’re aware, there’s a myth popularized mainly by cartoons that an ostrich will bury its head in the ground when a predator is nearby, being stupid enough to think that if it can’t see the predator, the predator can’t see them. If you weren’t aware, this is completely false! Still, the image is famous enough to make it easy to remember, so make a point to avoid “ostrich syndrome”. This refers to the attitude that if you ignore your problems, they’ll eventually go away. This too is completely false, and if you get stuck in this attitude it can be very hard to get out of it. I understand that dealing with or even considering your financial problems isn’t exactly pleasant. However, this little bit of respite is going to cost you massively further down the line. One of the most dangerous symptoms is avoiding discussing your finances with your partner. You probably know how easily this can spark an argument. Still, it’s in your best interest to crunch through your differences in opinion, put your heads together, and try to work as a team to deal with your money issues. Families all over the States and the world as a whole end up bleeding money by failing to look over their bills and credit card statements. The worst part of it is, a lot of them don’t even know about it! Unnecessary fees, insurance the family doesn’t need, and subscriptions which they thought they’d canceled are all among the big culprits which can gradually chip away at your capital. You’re never going to get out of your bad money habits if you don’t know what they are, so take your head out of the sand and start taking a closer look at where your money’s going. Look back through your statements, and narrow down the big issues. If you’re spending thousands every year on eating out, it could seriously be harming your ability to build up any significant savings or retirement funds.
Not Putting Yourself First
This one is a little confusing to some people. You may have thought you were paying yourself first by dining out every other night, getting a new car on finance, and other pleasurable buys. What I’m talking about here is paying your future self; the money you should be spending to ensure your future comfort and happiness. Once you get paid, you can naturally want to pay your bills, buy the necessities, and have a little fun on the weekend before anything. The problem here is that you’ll end up with no money at all by the time you feel ready to save. On your next payday, forget about the now, and think more about the later. You’ll look back at this change in the future and thank yourself for it. It’s important to learn how to live below your means, or what you currently perceive as your means. I know this doesn’t sound too fun, but try making it into a game. When you have the satisfaction of overcoming challenges, you’ll find that adapting to more sensible financial habits is much easier than you first expected. Every month, try to cut back a little on sensual, fun things, and put the money you save towards your future. Increase this by a set increment each month, and soon you’ll be amazed at how comfortable you are being frugal.
Not Learning The Cost Of Opportunity
Every purchase that you make can either be a potential investment, or the money you save by not making a purchase can be one. When you go about it the right way, the pennies you invest in different assets will become dollars in the future. Of course, everyone should have opportunities to spend a little on having fun through their lives. However, you need to make sure those occasions are well planned-out and executed in the right way. It may be hard to believe now, but you’ll enjoy having money in your retirement much more than you will in your youth. This is because young people have access to all kinds of free, possibly educational activities that you’ll be cut off from in your senior years. A lot of people don’t associate their personal finances with their social life. However, one of the worst habits you can have is associating with people who are hell-bent on losing money! Avoid negative situations and people. Instead, seek out friends who are working to get ahead in life, and put a priority on using their money wisely. This is one thing that major debt consolidation CEOs such as Alex Kleyner are all too aware of. By simply hanging out with people who have no concept of planning for the future, you can spend a fortune before you have the opportunity to use it for the things that matter. It’s better to buy a bottle of decent wine and have a lovely meal at a friends’ house than to buy $16 cocktails at a club all night and then not remember any of it! The cost of opportunity is the kind of sacrifices you make to achieve or gain something else in the future. It may be hard, but you need to be considering this with every little financial decision you make, starting now and going on indefinitely!
Failing To Keep An Emergency Fund
If there’s one kind of person who’s at more risk of a financial disaster than anyone else, it’s people who don’t have an emergency fund. Life is unpredictable, as I’m sure you know. All kinds of unexpected difficulties can suddenly be dropped on your head at a moment’s notice, and a lot of the time your only way out is paying for it. If you hit a financial emergency, and you don’t have a cash cushion sitting there waiting for you, then you’ll almost always be forced into debt. Those interest rates can pile on more and more debt, eat into your retirement savings, and put a horrible strain on you and your family. This pressure, in turn, can cause you and your family to make poor financial decisions for some quick stress relief, and before you know it you’ll all be stuck in a vicious cycle of debt. A staggeringly low proportion of Americans save or maintain an emergency fund. If you’re not one of them, then change that as soon as possible! Yes, your personal finances might be stretched as it is, but even putting away $50 a month can make things easier when disaster strikes.