Bad spending habits die hard, and old routines are no exception. If you find yourself without savings and spending more money than you earn, it’s time to eliminate those bad habits and adopt better financial habits.
Good money habits can help you establish wealth and improve your financial position. It will teach you to budget, save money, and work toward your financial goals.
Of course, breaking bad habits and forming new ones doesn’t happen overnight. However, with persistence and experience, you can begin transitioning to better financial habits.
Why bad money habits set you up for failure
It’s crucial to avoid spending recklessly at an early age. Reckless money habits may limit your earnings and leave you vulnerable for failure.
Not having a budget, spending more than you earn, and not saving any money will grant you little financial security as you get older. As illustrated, poor financial habits could be the cause of many financial difficulties in the future.
Bad money habits to drop
Do you know how your spending habits are affecting your budget? Below are a number of behaviors that can result in great losses, so be careful of your finances by avoiding them!
Racking up credit card debt
Ah, those magic plastic cards that make it all too easy to purchase that luxury handbag you’ve been dying to have. Racking up credit card debt is one of the most expensive poor money habits you can have.
Are you a US citizen with a credit card balance over $6,000? High-interest credit cards can cost you hundreds or even thousands of dollars in interest.
Having high balances on your credit cards can negatively impact your credit. To avoid wasting money on interest, be sure to pay off your balance in full every month. This prevents you from having to pay interest and saves you money.
Shopping when you’re bored
Back in the day, it was named home shopping network syndrome, or shopping when you were half-asleep and bored late at night. You’d call and order these delightful items or whatever your weak point was.
Thanks to online shopping, it is so easy to shop when you are bored. Shopping due to boredom is a costly behavior that racks up debt if you aren’t careful. Try out these activities instead of shopping.
Those enticing items displayed on the checkout line are not meant to be overlooked. This is a retail technique designed to encourage you to spend more before leaving the store. Impulse buys add up quickly and can consume your resources quickly.
Suppose your impulse purchases are $100 a month, which comes to $1200 per year! Learn how to stop shopping to stop this bad habit for good.
Shopping for status
Are you trying to impress other people by buying things? Sometimes it’s easy to get caught up in the limelight and desire to impress others with the things you own.
However, searching for status is not a good way to find true friends and leads to financial hardship. Remember, you should remain authentic to yourself, and you don’t need to impress anyone with what you own.
15 good money habits to build
Since you now know what money habits you should drop, check out the 15 best money habits to begin now.
1. Get on a budget
One of the first good money habits is to get started on a budget. A budget will help you manage your money efficiently. Budgeting helps to pay your bills promptly, create wealth by saving, and prevent money problems.
There are a number of budgeting tools and strategies you can use to make your budget. The key to overcoming budgeting obstacles is deciding on a budget method that is right for you.
2. Live below your means
Living below your means is an excellent money-saving habit that you can develop into. You can build your savings account more quickly and learn what your needs are versus your resources. Your goals do not include breaking your budget.
Living a frugal lifestyle may appear difficult, but you would be surprised at how much money you can save by even small changes to your lifestyle.
Cutting back on frivolous expenses like coupon clipping, buying used over new, and terminating cable can save you a great deal of cash.
3. Pay off debt
One of the primary things one should do when building good money habits is to pay off one’s debts. Not only is debt expensive but, more importantly, it also has harmful effects on one’s emotional and mental health.
You may feel like you’re adrift at sea without a life raft, but with an effective repayment plan, you can obtain out from under the financial burden of being in debt. By paying off your debts, you can start saving more money and safeguard your financial future.
4. Automate your finances
Save yourself some time and trouble by paying your bills on time. You may make automatic payments and have your account balances automatically transferred to your savings accounts. You need to review your budget continually, but this is a good method to take control of your money.
5. Build your emergency fund
Not having an emergency fund to pay for emergencies, such as a destroyed car or house repair, is one of the worst feelings in the world. Maximizing the amount of money saved in an emergency fund is one of the best money moves you can make.
Our goal is to be able to preserve 3 to 6 months of essential living expenses to cover unforeseen events. Begin by saving $1,000 and build from there.
6. Grow your money by investing
To start building your wealth and really gain financial independence, you should start investing. Investing your money can increase the amount of your income and secure your financial future.
You don’t need a lot of money to get started with investing.
7. Get the right insurance
Being inadequately insured can expose one to high costs. Having the right insurance is essential to shield your wealth and possessions.
Of course, the type of insurance coverage you need depends on your particular situation. Here are nine different types of insurance coverage you may not have.
8. Review your bank statements
Account theft is rampant, and checking your bank statements can help you identify unauthorized transactions quickly.
Reviewing your bank statements regularly helps you keep tabs on your fundss. Make doing so one of your new financial habits.
9. Increase your deductions
If you are a 401k enrollee, you should maximize your tax deductions as much as possible. This can increase your retirement savings and lower your taxable income.
Earn as much as you can to maximize the amount your company reimburses you. This is like having free money deposited in your paycheck!
10. Track your expenses
Balancing a checkbook may seem old-fashioned but it is still important that you track your expenditures since you don’t write checks anymore.
Keeping a spending journal or register will help you stay on track financially and avoid money mistakes such as over-spending your account.
11. Pay yourself first
An excellent way to save money quickly is to pay yourself first. This means you pay yourself by saving up money before you spend any of it.
If you earn a paycheck, you save a predetermined amount or percentage and deposit it into your savings account. This enables you to save money in the beginning and spend it later. This is a crucial money habit to develop because you will be putting your goals ahead of your financial priorities.
12. Pay your bills early
It’s easy to pay bills late from time to time, but doing so wastes money. Rather than paying your invoices by the date, consider paying them early. This will prevent you from forgetting and racking up late charges. You should pay a bill as soon as you get it.
13. Create a financial plan
To reach a goal, you need to consider where you are going. The same applies to your financial future. Creating a financial budget will help you achieve your aims and take steps to accomplish them. Include short-term and long-term financial goals, so that you can accelerate your progress.
For example, your goal is to save enough money to afford a vacation or pay off your home. Break down long-term goals into smaller ones to achieve them more easily.
14. Cut expenses
It’s time to cut back on fat, so to speak. Cutting out needless expenses saves a lot of money every month. Cancel subscriptions, disconnect the electric cord, lower your electricity bill, and allot your money to what you really want. Even minor expenses add up over the long term, and by cutting out these items, you can save a considerable amount of cash for something you really want. Like going on vacation.
15. Be a savvy shopper
You can save up to 40% by shopping used. Items such as electronics, jewelry, and clothing cost hundreds to thousands of dollars less when purchased used.
Shop sales and clearance racks to save money at retailers, and be sure to coupon and use cash back apps to increase your savings!
Get started with a money-savings challenge
It can be difficult to stay motivated to change one’s bad habits and cultivate good ones. However, if you create something that’s fun, you can relieve the strain and make it easier to maintain a positive mindset.
Try a money-saving challenge to build your good money habits. A savings challenge is a fun way to save money and can also increase your bank balance quickly!
Building good money habits lead to financial success
By practicing sound money management skills, you can save money and work toward financial independence. Saving money, planning for the future, and staying on top of your finances will lead you to financial success.
You’ll be ready for those unexpected expenses, avoid penalties and late payment fees, and have funds for a fantastic retirement.
As you establish sound spending habits, your wealth will soon increase and this will lead to your financial security.
Declining discretionary expenses may take time to adjust to, but is necessary to your fiscal freedom. Get started on your finances by checking out our free programs and resources!