Living on edge isn't as exciting as we like to believe. And such a living for a lifetime can be unhealthy and demoralizing. By changing one's financial situation and spending, you can change your status from 'broke' to 'wealthy'.
It will not be easy, but your financial life can completely switch gears by identifying lousy money habits, helping you to keep your pockets empty most of the time. The trick is to come to terms with these habits and work on them, keeping your guilt and greed apart.
- No Track of Your Money - Have you stuck living paycheck to paycheck and did not have a budget in place? You probably don't know where your money is going. Sit and identify what is costing you the most, where you can make financial cutbacks, and how to start making economic changes in your daily expenses. By just guessing or going in blindly into your situation, you may be missing critical information. Make a sheet or sit with a pen and paper in hand.
- Not Paying Yourself First - The source of income does not matter in this case; every paycheck or any money you get, you should always be paying yourself first, which means that you put this money into your savings or retirement before paying any bills. It is a popular strategy in the personal finance world but is vital to helping you build savings. Yes, you want to clear your bills and repay any debt you have. But if you focus on that and ignore your savings first, 9/10, you will have very little left to save.
- You Procrastinate Your Finances - We all are guilty of procrastinating. Not everyone is a personal finance nerd, and not everyone gets excited about their financial management, but like it or not, it needs to be part of your weekly routine. Too many times, we have heard people and friends say they will think about it later. That's 101 reasons why you stay broke or end up in financial troubles later. Being lazy costs you money too. Remove this lousy money habit immediately and start planning
Also read: Basics of Financial Planning
- Negative Atmosphere - People who are negative, pessimistic, and always blame others can drag you down. Misery loves company, so you better surround yourself with successful people and people who have optimistic nature. Their mentality will rub off on you, giving you great learning throughout. Less of hanging out, we feel it has more to do with the mindset of those around you than their financial status.
- Consumer Mentality - Instead of thinking about buying assets like stocks or real estate, you focus on spending on luxury items like cars, clothes, boats, etc. While there is nothing wrong with purchasing the latter if you have the means, always thinking like a consumer will eventually make you broke. Worldly things will bring you temporary happiness and not long-term money management. Start correcting your consumer mentality and keep control of your spending cycle.
- Get 'Rich but Quick' Approach - Building wealth and accumulating money is not a day's work. It can happen fast but is a long-term approach. Since most people lack patience and want to get rich quickly, they look for an easy way out and fall for ideas that hurt their pockets more than they help. Take the long approach to grow your bank balance. Most people who didn't inherit money worked hard behind the scenes for years.
- Using Credit Cards the Wrong Way - Credit cards can be beneficial for establishing credit, emergency purchases, and even getting cashback. However, most use it to buy luxury items that they cannot pay cash for, leaving your credit card debt to grow with high interest.
Also read: The Pros and Cons of Credit Cards
- Not Investing - Schools will not teach you this unless you went to college specifically for finances. You need to take your time every day if you are going to understand how to invest in stocks or real estate. Understanding the basics to get you started is not complicated. Yes, there is a lot of information covering the subject, but it's easier to digest than you think.
- No Money Goals - Once you know your budget and understand where your money is going, you need to set your goals. It can be weekly, monthly, quarterly, or however, you want to do it. But this behaves like a reminder and keeps you motivated to reach that goal. Without goals, you have no aim, and you don't know where you stand with your finances.
Also read: How to Set Achievable Financial Goals
- Spending More Than You Earn - This is pretty obvious not to do, but happens more than one can imagine. How do we end up spending more than we have? By taking loans and using credit cards too frequently. This adds to your debt which quickly balloons and has high interest, further sending you into a deep financial hole. Saying no to impulse purchases and making more income can all help alleviate this bad money habit.
There you have some of the bad money habits that you may regret highly in the future if you do not break. Hopefully, these will help you in your journey and give you clues into what might be holding you back financially.
(Check out 'Learn & Grow with Wizely' 'to read and learn all about personal finance and financial planning.)