Here are 8 bad financial habits that you should get rid of as soon as possible, and 8 good ones you should adopt ASAP.
Famous English poet John Dryden once said - "We first make our habits and then our habits make us". No doubt, this quote has endured the test of time. It applies to all lifestyle habits, including financial ones. Our financial habits shape our lives. They can make us or break us.
Building good financial habits might be hard for some, but the tendency to get into bad ones is high and much easier. Bad financial habits can discourage you and cause great frustration. They can have a terrible impact on your credit and finances and prevent you from realising your dreams of owning a home or retiring stress free.
But don’t worry. Once you identify which of your habits are working against you, it’s not hard to replace them with some good habits. When this is done, you are on the road to a rewarding and economical future.
Here are 8 bad financial habits that you should get rid of as soon as possible:
1. Relying too much on your credit card
People who want to maximise their reward card points often prefer to shop with a credit card. They choose to pay it back monthly. This is a smart way to grow your budget. But if you have a monthly balance to pay back, you lose money on interest. If not paid back for a long time, this interest can pile up and hurt your budget.
If you rely on credit cards to achieve your goals, it is probably time you modify your budget, reduce costs, and get better control over your finances. Spend less than what you make.
2. Paying for convenience
Whether it's coffee on the way to work or getting food and groceries delivered in 10 minutes, we all have the habit of making life easier. This convenience can turn into a money problem when we end up spending big bucks instead of stepping out ourselves or planning in advance.
Consider skipping breakfast sandwiches on your commute and enjoying some meals prepared in advance instead. Step out to buy groceries. Choose to walk for short distances. Such small switches can save thousands in a year.
3. Shopping Emotionally
It's not uncommon for our emotions and moods to drive our purchases. "Retail therapy’ makes you happier and more controllable. However, these emotions are temporary. Once they are stable, the situation remains the same, but your budget definitely takes a hit.
Go for a walk, call a friend, or stroke a dog, but don't whip out your wallet. If you wait until the end of the month and realise that you're over budget, you don't have time to adjust your spending.
4. Neglect of product maintenance
What you ignore today will demand your attention in the future for sure. Financially responsible individuals do not ignore the need for regular maintenance when it arises. If you neglect it now, it will pile up and hit you further in the future.
Continuous maintenance should be performed on a regular basis. Simple maintenance of cars, air conditioners, and even homes can save you a lot of money on repairs and replacements.
5. Forgetting about your change
If you still use cash on the go, this one would be really helpful for you. Don't ignore the coins you get as change. Instead, put them in jars and take them to the bank on a regular basis for sorting and deposit.
You will be amazed at how much you can save over time. And you can increase these savings even further by putting them in the appropriate savings account.
With the world going digital, now imagine if you get to save this change even on online purchases? Jar app saves all your change from online transactions automatically in digital gold for you. Savings made easy. Download the app today and try out yourself.
6. Making impulse purchases
Adding a pack of mints to your cart at the grocery checkout or making that burger a meal may not seem like a big deal, but habitual impulse buying can become problematic for you.
For example, online retailers can make purchases easier than ever by adding new tricks to encourage customers to return to abandoned digital carts - such as email reminders and promotional offers—or offering in-store pick-up.
These unplanned costs, if uncontrolled, can easily ruin a well-planned budget.
Read more here: 14 Tips To Stop Impulsive Buying & Curb Your Spending
7. Not automating your payments
One of the foundations of sophisticated money management is the automation of savings and payments. You should automate savings, credit card payments, investments, retirement savings, etc. If something isn't automated, you are more likely to miss financial goals or miss payments.
Check out: How to Automate your Savings Plan: Save while you Sleep
You can easily automate savings and investments on the Jar app with its Auto-save feature. Set a daily amount to be deducted and saved in the form of Digital Gold in your account.
8. Raising living standards
Too often, as soon as people realize they're getting a raise, they begin to mentally plan how to finally buy the next thing they've been waiting for. Hold your horses.
You could achieve financial independence much faster than expected if you could save most or all of your salary increases instead of buying a new iPhone or car.
Here are 8 good financial habits that you should adopt for a brighter financial future:
1. Maintaining a Budget
Everyone needs a budget, regardless of their income. Budgeting for a month and sticking to it is the best way to maintain financial well-being. It ensures that all your invoices are paid on time and your savings are on track. In addition, it will pave the way for you to achieve your financial goals and resist the temptation to spend heavily.
If you don't have a budget yet, create one. If you have a solid budget, keep using it. Creating and sticking to a budget is one of the best economic habits that anyone can adopt. You should regularly reassess your budget to determine what works and what doesn't.
Make a list of all important expenses such as rent or mortgage payments, utilities, groceries, etc. Then add everything else, such as streaming subscriptions and takeaways. Once everything is listed, start cutting out what you don't need. These savings can be used to replenish emergency funds and assist in debt repayment.
2. Repay All Credit Card Fees
Credit card fees are a major obstacle to your financial well-being. Make sure to repay your entire balance each month. Also, make regular repayments for other high-interest consumer loans, including student loans. Repay them on time and it will help you build a good credit.
Not repaying on time only gives you a false sense of how much money you have and then puts tremendous pressure on you to make up for the difference later. Paying the invoice in advance gives you more control over your finances and makes it easier for you to develop good financial habits.
3. Shopping without a credit card
One of the best financial habits you can develop is shopping without a credit card. If you decide to withdraw cash instead of carrying the card, you're only spending money on what you were originally trying to buy.
There's also a real-life check if you have to hand over the hard-earned cash directly instead of swiping the card. You can also use a prepaid debit or gift card.
4. Create an Emergency Fund
An emergency fund is money set aside for unexpected costs. Your emergency funds should match your spending for at least 6 months.
Not only does this fund provide peace of mind, it also prevents you from choosing your credit card debt in an emergency. It takes time to save that much, so start small and focus on making every day count. 5 Effective Hacks to Build an Iron-Clad Emergency Fund.
Don't forget to reassess and renew every year if your living expenses increase. Don't worry if your income becomes unstable, you lose your job, or you can't save.
Cover your basic needs first and save whatever you can, no matter how small. All the money in this account increases the buffer between you and financial stress in the future.
Read: Why Investing in Gold for an Emergency Fund is a Good Idea
5. Know the difference between ‘needs’ and ‘wants’
Always be aware of your ‘needs’ and ‘wants’. It helps you spend your time and money carefully. ‘Needs’ are what you need to survive, and ‘wants’ are what you want but don't need to survive. In your personal budget, prioritise your needs. Once all your needs are met, you can allocate any funds to your wants.
It may seem obvious, but it's the hardest to implement. Avoiding unnecessary spending and voluntary purchases can be difficult.
The fascinating world of social media, modern convenience, and high-end accessories presented as a necessity are some of the many other factors that make people impulse buy. It's no secret that financial stability isn't how much money you make. It's about how much money you can keep.
6. Take Health Insurance
The maxim that "prevention is better than cure" plays an important role in financial well-being. An increase in health-related illnesses is unavoidable. In addition, rising medical costs have made health insurance mandatory. So it is advisable to always have a health cover for you as well as your family.
7. Invest Smartly
Although there are various ways to invest, successful investing depends on learning and staying up to date with changing trends. Investing early and starting small is better than jumping into a big, risky move that seems monetarily attractive but can cause a big loss.
The magic of compound interest allows you to grow your money over a period of time. But this requires a long-term investment. Therefore, be sure to continue investing during the sudden ups and downs of the stock market.
Check out: Short Term & Long Term Investment – Finding The Right Balance
8. Set goals and save for them
Many people understand the importance of saving money for an emergency fund and retirement. But what about specific goals? Financial goals can be saving money for your child's college education, for changing cars without getting a loan, doing major repairs on your home, taking big vacations, etc.
Keeping financial goals in mind also makes it easier to avoid impulse purchases and stick to budgets. Financial goals can not only improve daily life, but also prepare for the future. Once you focus on what you want to do in life, creating the saving and spending habits that will get you there will become infinitely easier.
Must Read: How can you Grow your Wealth with Goal-Based Savings?
Quitting bad financial habits and adopting good ones can put more money in your pocket and make your life much easier. Understanding the steps you can take to keep your finances in check can also help you avoid debt and the associated stress.