We all make mistakes. Especially when it comes to finances.
If your goal is to save more, earn more, and be more in control of your finances this 2018, you should take some time reflecting on how you manage your money.
Here are some of the bad money habits that we need to unlearn in order to achieve our financial goals this year:
8 Bad Money Habits We Need to Unlearn
#1. Waiting Until You ‘Have More Money’ To Invest
When should you start investing?
Many people wait until their bank account reaches 6 or 7 figures before they invest. But according to financial experts, if you haven’t started investing yet, NOW is the time.
Heard about compound interest? Its magic works best the younger you are.
Investments can be in a form of stocks, shares, or property. If you’re nearing 30, you may want to consider investing towards your retirement, although other forms of investments are suitable too.
#2. Spending All of Your Paycheck
It’s tempting to buy more of your ‘wants’ rather than your ‘needs’ when you have plenty of cash on hand. But if you want to ensure your future, you should start saving NOW.
Many people adopt the 50-30-20 rule when spending their paycheck:
50% of your salary goes to your necessities, such as your housing and bills. 30% goes into your wants, such as dining and entertainment. 20% goes to your savings account.
Of course, the more the better. If you can afford it, you can allocate more money on your savings than wants.
#3. Going Without A Savings Goal
When saving, you should have a goal in mind.
People who set a money savings goal save faster than those who don’t.
Whatever your purpose is – buy a new home, realize your dream vacation, or save money for your kid’s education, you’ve got to name it.
If you’re new to saving, try working on a small goal. Taking into account different factors such as your monthly income and expenses, work out how much you can save for each goal.
Try to achieve a balance between what you can afford and how long you want to save for.
#4. Ignoring Your Bills
Paying your bills on time can be challenging but it is an essential skill to learn.
Not paying on time can affect your credit rating and leave you in debt.
The first step is to get organized:
- Keep all your billing statements in one designated folder and be sure to keep track of when they should be paid. Same thing with a personal loan online.
- Be mindful of your due date to avoid interests.
- Choose a payment method that suits you.
- If possible, pay your bills or set a budget for them one month in advance. Early payments can mean discounts and less worry.
#5. Having No Idea Where Your Money Is Going
Have you ever asked yourself “Where did my money go?”. You’re not alone.
Many people struggle with managing their finances and keeping track of their expenses.
This is not a good habit. Before you even get your paycheck, make a plan of how you are going to spend it.
Also, keep track of your daily expenses. You can either write them down in a designated notebook or make use of an expense monitoring app.
#6. Depending On Your Children For Retirement
When planning for retirement, the earlier you start the better.
Your retirement shouldn’t depend on other people, not even your kids. Remember that they will have their own family too and would have many expenses of their own.
In addition to saving money, you should contribute to your 401 (k). If your employer offers a traditional 401(k) plan, you can contribute a pre-tax money which can boost your savings over time.
#7. Paying The Minimum On Your Credit Card Balance
If you can pay the full amount due, do not settle for paying just the minimum payment required on your credit card bills.
Sticking to the minimum could cost your monthly dues to pile up, which could put you in debt. Just as you keep track of your other expenses, also keep track of your credit card usage. It’s easy to get overboard when you’re shopping with a credit card so be careful.
Set a monthly budget. The lower the better.
#8. Paying For Subscriptions You Don’t Use
Have a lot of subscriptions?
Whether it’s an antivirus software for your laptop, a fitness app, or a magazine, if you’re not using it anymore, make sure to cancel your subscription.
Most companies employ an auto-renewal program for subscriptions of their products. Check the user agreement to be sure!
A Final Note
Managing your finances can be overwhelming.
By unlearning these bad money habits, you become more in control of your finances and achieve your financial goals.
ABOUT THE AUTHOR
Lidia Staron has been working as a writer, editor and literary coach for 5 years. She contributes articles about the role of finance in the strategic-planning and decision-making processes.