We are well into the new year and if you are like most people you are working hard to pay off debt, save more and get your financial life on track, now its time to take things to the next level by identifying your bad money habits and giving them the boot.
I believe its safe to say that nearly all of us have at least a few bad money habits that are working against everything we are trying to accomplish in our personal finances and it’s time that we part ways with anyone or anything that is not helping us accomplish our financial goals.
The majority of people know they are not saving as much as they could and know they have leaks which are letting money slip from their pockets each month but either let themselves believe it’s somehow normal or they have not taken the time to really understand where their money is going and will continue their bad money habits unless they take the time to identify their spending patterns and correct them.
Let’s take a look at some of the most common bad money habits and what you can do to give them the boot so you will have more money to put towards debt, savings and/ or retirement.
Top 5 Bad Money Habits
Here is my list of the most common bad money habits and how you can kick them to the curb. (note that these are in my opinion, there are definitely more that could have been listed)
Not knowing your latte factor – if you have not read The Automatic Millionaire by David Bach then I highly recommend that you add it to your must read list.
In the book Bach explains that your late factor is all of the small purchases you are making on a consistent basis that are not necessary and could be preventing you from reaching your financial goals such as eating out for lunch at work, lottery tickets, tobacco, alcohol or even a latte.
Two dollars here, ten there, it really all adds up to a massive pile of cash that is could be difference in paying your bills on time being forces to pay another late fee.
Most people do not know their latte factor and they continue to go through their day making these small purchases not knowing that they are draining their checking accounts and preventing them from achieving the financial security they want.
Tracking your spending for a few weeks to a few months is a great way to identify your latte factor and can help reveal areas where you have an opportunity to cut spending.
Carrying a revolving balance on your credit cards – Plastic is by far one of the most expensive wastes of your money, high interest rates and fees can make not paying off your credit card balance at the end of the month one of the top bad money habits you can have.
I remember how hard it was for me to pay off all of the credit card balances I racked up when I was in college and could not imagine going through that again so I always try to pay off my credit card balance at the end of the month to avoid high interest charges.
I use my credit card for almost all of my purchases to earn points and cash back but will never charge more than I can afford to pay off when the statement is due.
This is a very hard habit to keep but at one time I had over 30K just in credit cards and they almost forced me to file bankruptcy because it got to a point where I could not even afford to make the minimum payments anymore so I always try now to pay off the balance each month.
If you need help with credit card debt there are many credit card debt relief companies which can give you the support you need to turn your financial situation around.
Not shopping around for monthly services – It doesn’t matter what monthly services you pay for each month, there is probably a comparable service which you can switch to which can really save you some serious coin.
Cell phones, auto and life insurance, internet service, cable, home phone services are just a few areas you can compare prices with potentially save a lot of money verses what you are paying now.
You will be amazed at how much money you are probably wasting each month on high prices services and will be blown away when you find out how much less you could be paying by switching to other providers which will go a long way in your efforts to pay off debt and improve your financial situation.
Not using coupons – Deals are everywhere and if you are not taking the time to search them out you are basically opening the trash can and tossing in a fist full of cash.
One of the biggest expenses for any family is groceries and food, yes we have to eat and have hygiene products but if you can save money on those items by gathering a few coupons then why wouldn’t you?
There are coupons out there for hundreds of items in your grocery store from paper products, shampoo to orange juice, you name it there is probably a coupon out there for it.
Most stores even have their own in store coupons which can be used in addition to the coupons you find online and in the Sunday paper to add even more savings.
The tv show Extreme Couponers taught Americans the power of smart couponing and how you can get your favorite items at the grocery store for unbelievably cheap prices, even free in some cases.
I am not saying you have to go crazy with it but if you can save even as low as $10 a week with coupons then you can use that extra $40 a month to pay off debt, buy some stock or stash away under your mattress.
Not Investing – If you are not taking advantage of your company’s 401k and/ or stock purchase plans you are probably missing out on loads of free money.
Most companies will match your contribution up to around 6% so if you are not putting in at minimum what they will match you are leaving free money on the table.
I’m still not much of an investor, but starting this year, one of my New Year’s resolutions is start investing so I opened an account a few weeks ago with Betterment to invest for retirement.
I will try to take 10% of all my earnings and invest it on top of funding my 401k and growing my emergency fund.
Investing is how the rich get richer and is critical if you want to build wealth.
Many people fear that investing is dangerous and that they will somehow lose everything they put in, this is absolutely crazy and while it is possible, it is highly unlikely if you invest wisely and diversify.
There are a ton of investment options with varying levels of risk and reward, no risk no reward.
Most Common Bad Money Habits
We have looked at just a few of the most common bad money habits, there are probably another hundred or so I could have listed but these are the ones I think affect the most people.
Everyday we get older and need to be more responsible about how we treat money and while its not everything it is definitely an important part of life so breaking bad money habits now is crucial and adopting more good money habits so we all can live a happier and more financial secure life tomorrow.