Bad spending habits could be hazardous for your financial health. Our bad decisions and unnecessary spending often lead us to financial losses and debt. Debt isn’t something that just happens accidentally; it’s due to our spending habits.
It’s no coincidence that people with poor money management skills and bad spending habits often find themselves buried in debt. Most people who get into financial hardships is not because they don’t make enough money, but because they don’t manage their money well enough. Managing money is a skill that we are not very often taught at schools or as children by our parents. But as we grow older, we learn to manage money the hard way. Here are five spending habits that you need to break free from.
5 spending habits to break free from
OK, so if you are buried in debt and want to break free from the shackles of endless financial crisis, here are five habits that may help you pay off your debts and straighten up your financial situation. These are the spending habits that you want to break free from.
1. Stop spending more than you earn
Is it possible to spend more than you earn? It’s more common than you think. About one in five Americans spend more than they earn. You would logically think that it’s impossible. How could you spend $1,500 a week when your paycheck is only $ 1,000? The truth is spending money is so easy that you might be spending more than your paycheck without even realizing it.
There are just too many ways that you could be spending more money than you earn. For example, if you are not careful with your money, you could be spending with your credit card, taking personal loans, borrowing from friends, dipping into your savings, and so on. Your over spending habits are sure to get you buried in debt.
2. Avoid using credit cards when you have cash
Credit cards are so easy to use that they make you purchase more things than you need. Most of the times they make you feel like you are buying stuff without having to pay for them. However, with the interest rates and fees, credit cards could make you pay more than what you actually spend, and so, they should be used carefully.
“Credit cards are a weapon in your financial arsenal. Like all armaments, they can be used in strategic defense or to shoot yourself in the foot. Too often, it’s the latter – the average U.S. household carries $15,480 on credit cards.” – Kevin Voigt | NerdWallet Finance
For your everyday purchases, like buying gas, groceries, clothes, entertainment, etc. using cash is the best way. Choosing credit over cash when you actually have the cash will make you spend more and finally lead you to more debt.
3. Don’t borrow to pay off debt
Come to think of it, when you are using your credit card to pay off debts or borrowing more money to pay off money that you already owe, you are actually not paying off anything, you are just getting into more debts by putting them off. It could end up costing you more money because you pay more interest charges that way.
The only way you could benefit from paying off credit cards with credit is if you find a low interest loan that would pay off your high interest credit balances. However make sure you take finance charges, transfer fees and other charges associated with credit cards into consideration.
4. Stop ignoring your bills
Your borrowing and paying habits are very important in building your credit history. To build a solid financial future, get into the habit of paying off your bills on time. It sometimes helps to pay more than the minimum payment and pay off your debts faster. It helps you in two ways, first, you get a better credit score, and second, you save on finance charges and fees. If you wait till the collection agency starts calling you, it won’t look good on your credit history.
5. Stop making excuses for not saving
Getting into the habit of saving money can be the most important financial habit that you can get into in your lifetime. Set aside some money every week, it could be any amount, as little as $20 dollar a week could lead to a good amount of savings per year. For making savings, try setting up automatic deposit systems that deduct from your checking account and deposit into your savings automatically.
You know your spending triggers. Budget your money and think about what makes you spend more. You might go over your budget if you don’t control your spending. For example, you might budget $50 a week for eating out and entertainment, but you might go out and spend $250. Or you might be buying stuff that you don’t really need at the grocery store just because they are on sale. Stop making unnecessary purchases. Carry cash only, and only what you need, when you go out to dinner or clubs. This will help you to stay within your budget.
The bottom line is, stop complaining about how small your paycheck is and how behind you are on your bills. Start doing something about them; find ways to increase your income, reduce your expenses, come up with a plan to pay off your bills, and put some money away for saving plans. Your financial health depends on how well you manage your money.
Hope you will be able to benefit from these tips. We will be back with more financial tips and advice for you. Keep using these tricks, and let us know how well they are working for you. So, until next time, stay well and we will see you on our next blog.
Source: Institute of Ecolonomics
Related Articles and Resources:
- Tips on Managing Your Finances for Financial Health | Institute of Ecolonomics
- 5 Ways Parents Can Help Children to Save Money | Institute of Ecolonomics
- A Beginner’s Guide to Money Management | Institute of Ecolonomics
- 9 Bad Financial Habits You Need to Break Right Now – NerdWallet
- Break Your Bad Spending Habits With These 9 Tips