Five Bad Money Habits and How to Overcome Them
Small missteps can quickly develop into bad money habits that could wreck your finances. Here are five common money mistakes you might be making and some strategies to help rein in the flawed financial habits that are hurting your wallet.
Not saving enough is the top financial stress for many. People often don’t meet their savings goals because they don’t set aside money immediately and automatically after payday. If you do not learn how to pay yourself first and automate that process, your plan of action is to basically save whatever is left which is not going to get you ahead. It’s not always about the money but forming good habits. There is no question that the people that save automatically, save more.
There are many people who are living beyond their means which means they are amassing consumer debt. Wasteful spending can become an even bigger issue at certain times of the year like the holidays. One of the ways to address wasteful spending is to identify the discretionary or choice spending on various expenses and cut them down or eliminate entirely. If you are able to make small changes in the beginning that do not disrupt the standard of living it will establish a pattern which makes you feel good about what you are doing and give you the confidence to look deeper into the budget and make additional changes which will free up more money.
Not Paying Off Debt
Americans owe trillions of dollars in consumer debt. This means that debt has to be serviced which really means money is not working for us but against us. When you eliminate debt, you essentially give yourself a raise and that money can now but put to work in other areas of financial planning including asset accumulation. People need to make a concerted effort to consolidate and then eliminate debt. That can start with looking for better interest rates or transferring balances to better cards with lower introductory rates and then paying more than the minimum to get rid of the debt as quickly as possible.
Not Planning For Retirement Early Enough
People do not save enough money for retirement and that problem really roots from not starting early enough and letting the power of simple concepts like the power of compound interest and the rule of 72 work for them. Outside of many not having enough saved, there is a % of people that have absolutely nothing at all saved for retirement. Retirement accounts allow you to save a portion of your paycheck before taxes, and many employers will match part of your contribution which means if you are not participating you are essentially leaving free money on the table.
Ignoring Financial Problems
Money issues are a major source of stress for many people and when those money issues start to mount, a common reaction is to turn your back on the situation and start to ignore the issues entirely which only compounds the overall problem. Ignoring will only make things worse. The key to addressing issues and getting on a better path is to find out what is going to motivate you to take the necessary action steps to conquer or overcome what needs to be completed. Use that motivation to take initial small steps, nothing to drastic at the beginning and then create good habits that will put you on a better trajectory going forward.