In today’s unsure economy, most of us have made significant changes to the way we view money, spending, and our financial future. We’ve switched from name brand to generic, clipped coupons, and shopped for sales. Most of us feel pretty good about the changes we’ve made. Unfortunately, in spite of those changes, many of us have also developed some costly bad habits. Here, I am not talking about bad habits you can put a price on, like smoking or eating out too much (that’s another story); I’m talking about bad money habits. These habits, quite often overlooked, could be costing you thousands of your hard-earned dollars. Here are six of today’s most common financial bad habits:
1. Not opening the bills. This is a potentially disastrous way to handle bills, with late fees costing you money and your credit rating. Even if you only pay bills twice a month, be sure to open mail as it comes in and organize it by date to ensure deadlines are met. Additionally, opening mail will also allow you to quickly resolve any erroneous charges or other issues that arise on your bills. Even if you know you don’t have the money to pay your bills, not opening them will not solve the problem.
2. Not having a flexible budget. Maybe you have a budget that you plan to revise it in a few months, once you get the car paid off. That’s great – it is necessary to budget for short term goals, especially if you’re saving up for a large purchase or paying off a debt, but don’t forget the big picture. You should also have a plan for the foreseeable future and beyond–retirement planning, home purchase, starting a family. Planning today may eliminate higher, unexpected costs later.
3. Overdoing a Carpe Diem! attitude. This great phrase has led to many good and many bad decisions over the years. While you must enjoy the life you have now, do not seize today so much that you are still paying for it next Christmas. Impulse buys, trips, and other “me” items should be paid for in cash, based on a specified allotment you give yourself. Once your monthly cash is gone, the spending stops and so does your fear of opening the credit card bill next month.
4. Seeking the quick money. Are you attracted to get-rich-quick plans, such as day trading or high risk investments. Yes, you may earn money…but more often than not, you will lose whatever you put into it. Be sure to research whatever investments or financial deals you make and know the risks…and never put any money into this type of venture if you can’t afford to lose it. The same goes for playing the lottery, bingo, and engaging in any kind of gambling.
5. Being clueless about your spending. If you’ve ever taken your wallet out at a register, had no cash, and couldn’t remember where you spent it, then read closely. You need to track your money so you know where it goes and who gets it. One of the easiest ways to identify financial bad habits is by tracking your spending. Track all expenses for one entire month—this means everything from your morning latte and lunch with your coworkers to your rent and vehicle expenses. At the end of the month, review your expenses and you’ll be amazed at what you find.
6. Overvaluing your Rewards card…Yes, those ever-popular rewards credit cards may be great for earning trips and free hotel stays, but did you know that the average Rewards-based credit card has a 2% higher APR than other cards? Also, economists have noted that people may increase their spending and use of the cards as they get closer to rewards they want. So, if you typically pay your card off at the end of each month and you view the rewards as an unexpected bonus, these cards may be great for you; but beware of your interest charges if you carry a balance from month to month.
Regardless of your financial situation, talking stock of how you spend money will reveal some surprises. You can then make an action plan to make changes in your behavior. If you put your plan into play, reevaluate in six month. You will very likely find that your financial outlook is different, you are more aware of your finances, and you have more money to spend.
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