With the first month of the new year coming to an end, many of you likely have your financial goals decided for the remainder of the year. Some of you may want to pay off consumer debt, while others may want to jump start your savings goals for the new year. Regardless of that your goals are, it is likely that you have a few bad money habits that you may not have been thinking about. It will be significantly harder to accomplish your goals if you’re still making bad money mistakes simply because of bad habits. I’ve compiled seven bad money habits – some of which I have made – that you should consider breaking in 2020 in order to jump start your way to being successful with your goals.
1. Waiting to Save
Many people tend to justify not saving money or saving for retirement because they’re waiting for something in their life to change. They may be waiting for a raise so they’re able to contribute more to their savings. Others may be waiting for a new job to settle into before they start a retirement savings contribution plan. Some people may consider their lives to be too hectic, and want to wait for stability before they begin to save. Some may even be waiting to get married before they consider saving for retirement.
This is a very bad money habit to have, and it is very important that you are able to break it. There is never a good time to start savings. There will never be enough “extra” money that you can put away. It is unlikely you will ever be in a “perfect” situation. It is very important that you start to save as early as you can. Make sure to add a savings category into your monthly budget and start right away.
2. Using Your Credit Card as an Emergency Fund
Before I go any further, I will absolutely say I was guilty of this. Before I started this journey to financial freedom, I had the mentality that I could simply use my credit card if an emergency came up. Some people view their credit cards as a safety net, and they mentally feel as though they have a backup plan. This is a dangerous way of thinking because emergencies do happen, and you do need cash.
You need a savings account that is liquid (cash) that allows you to access the money quickly and easily. If your emergency fund is your credit card, what will happen when you have to use the credit card? How will you pay it off after the emergency? Once you have an emergency fund established in your savings account, you will have less emergencies. Things won’t feel like emergencies anymore once you realize you have the means to cover them when they occur.
3. Paying for Convenience
Many people who may simply for convenience do it out of laziness. There is a massive trend in this in both the millennial and Gen Z generation. You should recognize that when you pay for convenience, you are also paying large fees. If you are an extremely busy person, and your time is worth a lot of money, it may make sense to pay for convenience. For example, having someone clean your house, do your dry cleaning, or do your cooking. However, this only makes good financial sense if you can justify the cost of your time. For many people (myself included), I can do all of these things myself and not have them interrupt my daily plans.
4. Outsourcing Responsibility
Your secure financial future is no one’s responsibility except your own. You need to invest in yourself; you need to gain personal finance skills, understand the basics and terminology, and understand how finances work. It is alarming to me how many women in today’s society still have the mentality that “my husband takes care of the finances” or “my dad helps me with that”. It is great if you want to get help with your finances, but it is so important to have a basic financial understanding. You can gain the basic necessary knowledge from reading books, listening to podcasts, watching YouTube videos or from reading blogs. You must accept that your future financial success is your responsibility.
5. Ignoring Small Fees
We all know that small fees add up over time. But how many of us actually want to make the necessary phone calls or emails in order to fix them? This was always a major hurdle I faced. If I was over charged, or realized I was paying for a subscription that I no longer used, I tended to ignore it. It’s only a few dollars, right? Wrong. These small fees can add up to a lot of money over the course of a year that could have gone to savings or debt repayment. I want to encourage you to go through your bank statement and look at all the transactions. Are you paying for services you’re no longer using? Are you continually paying fees that you shouldn’t be? That money is better in your pocket than in the bank account of multi-million dollar corporations.
6. ‘Head in the Sand’ Mentality
When it comes to their finances, many people choose to live their life in ignorance. They likely know that they have financial troubles, such as overwhelming consumer debt, student loans or collections. They likely know they’re not savings as much as they should, or could be living beyond their means. Instead of actually facing their problems head on, many people tend to brush their problems aside and simply hope for the best. I want to encourage you to break this cycle. If your habit is ignoring your finances, you need to learn how to face them head on and tackle them one step at a time.
Personally, I lived like this for a long time. I was aware I wasn’t in the best financial situation, but I wanted to continue living in ignorant bliss. I was surviving, but wasn’t thriving. I’m currently still in the middle of fixing my situation. Facing my financial situation head on was likely one of the hardest things I have had to do, but it was necessary. It isn’t easy, and it will take time. However, it will absolutely be worth it.
7. Spending Money to Impress Others
This is possibly the most dangerous money mindset to have. Spending money to impress others is nothing new to our generation, but social media has amplified it’s affect. Many people are finding themselves in very horrible situations from trying to compare themselves to other people they see on the internet. They spend money that they do not have simply to try to keep up their appearances on Instagram. They try to live a lifestyle that they cannot actually afford.
Some of you may remember the incident a few years ago where a young girl got herself into over ten thousand dollars of debt from simply trying to live a lavish lifestyle to showcase on Instagram. There are no positives from living this lifestyle. They may feel good about what they’re able to show online, but in reality they have gotten themselves into a deep financial hole, and nothing good comes from that.
Do you have any bad money habits that you’ve been trying to break? If you do, I’m sure many of us have them as well. Leave them in the comments below. I’d love to start a positive discussion of support on how we can break our habits and succeed with our financial goals in 2020! Out with the bad, in with the good!