Developing good habits helps us focus on the things that need our attention the most.
But as you work to get your financial life back on track, you’ll likely find old habits that are counterproductive to undermining your progress. Some of them worked once, but now they’re holding you back. Others have always been bad.
Letting go of bad money habits makes it easier to improve your financial life. Here are some bad money habits and tips for breaking them.
1. Carry a credit card balance
Carrying a balance on a credit card is like walking down the street with a hole in your wallet and letting money leak out.
Here’s why: Suppose you pay off a balance of $5,000 on a card at 15% interest. If you only pay the minimum amount each month, it will take decades to pay off the debt and cost you thousands of dollars in interest.
Build a better habit: Spend every penny getting rid of credit card debt. If you have other pressing debts, make a plan to settle them all. For more tips on how to stay out of debt, check out “7 Easy Ways to Stay Out of Debt.”
Prevent the balance from building up by forming a new habit of paying the entire bill every month, no exceptions.
2. Not funding a pension plan
There are compelling excuses to put off saving for retirement. But none of these excuses will matter if you reach retirement age with little savings. And, if you don’t take advantage of your employer’s matching contributions to a retirement plan, you’re losing free money every month.
Build a better habit: Start paying close attention to your retirement savings. If you can’t significantly increase the monthly contribution you make immediately to your plan, increase it by 1% per month. Once a year, check the performance of your investments and rebalance your portfolio.
3. Not buying monthly services
I hope you have made comparisons before purchasing insurance policies. And we hope you’ve done the same with phone, internet and cable services.
But you may be missing out on savings if you don’t check prices every year.
Build a better habit: Put some energy into improving your financial life. Once a year, spend 30-60 minutes researching prices for monthly services. For your convenience, keep a list with each company’s name, your account number, and your monthly payment amount.
If it seems like you’ll never be able to make it, consider contacting BillCutterz, a service that negotiates on your behalf for discounts on your monthly bills. Here is a report on how it works.
4. Pay for cable or a landline
Cable TV prices are only going up. Free and cheaper alternatives to cable make experimentation worthwhile. But will you get out of your rut and try something new?
Build a better habit: Before trying a change, record your viewing habits for a week or two to see how and if you use the services you currently have. If streaming sounds like a legit option for you, check out “12 TV Streaming Services That Cost $20 A Month – Or Less.”
Ditto for your landline. If you can, ditch the landline and only use cell phones. If that sounds too drastic, refrain from using the service for a month or even a week while you research alternatives.
5. Ignore coupons and promotion sites
If you’re not using coupons and checking out daily deal sites, you’re spending too much. However, you still need to be disciplined when shopping for bargains, so you don’t sabotage your good intentions with impulse purchases.
Build a better habit: Fight bad habits in small bites. Try a single deal or coupon site. Money Talks News’ deals page, for example, features new sales and coupons every day for clothes, shoes, electronics, tools, and more.
6. Playing it safe
Safe investment is important. But there is certain, and then there is too certain. Keeping all your money in risk-free accounts means that inflation will slowly but surely rob you of your purchasing power.
Create a new habit: Don’t break all your bad habits at once. Choose one and concentrate. For example, make managing your investments a priority. Money Talks News founder Stacy Johnson offers some tips for getting started in “Ask Stacy – How Do I Invest in a Mutual Fund?”
7. Get addicted to lattes
This $4 latte kills your budget. Such a latte each working day is $20 per week, or potentially $1,040 per year. If you tip a dollar every time, you’re spending $1,300 a year. Surely there is something you would rather do with that $1,000.
Build a better habit: Replace old ones with new habits that you enjoy. A latte is a way to indulge, so find treats that don’t blow your budget.
8. Living without an emergency fund
If you don’t have an emergency fund, your life is a high-flying act with no safety net. Emergencies are inevitable. Life is full of it.
Build a better habit: Commit to change. Write down your commitment and put it where you will see it. This will allow him to strengthen your resolve.
Get involved and watch your savings grow. If necessary, take on a few extra hours of work each week, whether it’s working overtime or watching a neighbor’s dogs. For more tips, check out “9 Tips for Starting an Emergency Fund Today.”
9. Buy retail
Paying the retail markup is like putting a match to a pile of cash. Smart shoppers find ways to avoid this.
For example, the value of a new car drops rapidly the minute you pull it off the dealership lot. So buy one that is gently used instead.
Build a better habit: If you feel pressured to keep up with your friends or neighbors, ask yourself what it’s costing you. Avoid malls and brand name stores except when shopping for products. Look up prices online so you know a good price when you see it.
And check out this article: “41 things you should never buy”.
10. Use shopping as entertainment
Maybe you know people with compulsive buying habits. Maybe you are one of them. Expenses create a strong dependency that seriously damages your budget and your family’s financial security.
Build a better habit: Try a quick spend. Delete your name from catalog listings, avoid stores, and hang out with friends whose idea of fun doesn’t include shopping.
Check out “11 tips and tricks that will save you from overspending” for more tips.
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