Developing good habits helps us focus on things that need our attention most.
But as you work to get your financial life on track, you’ll probably find old, counterproductive habits undermining your progress. Some of them worked once, but now they’re holding you back. Others have always been bad.
Dropping bad money habits makes it easier to power up your financial life. Following are 10 bad money habits, and tips for ending them.
1. Carrying a credit card balance
Carrying a balance on a credit card is like walking down the street with a hole in your wallet and letting money leak out.
Here’s why: Suppose you are paying down a $5,000 balance on a card charging 15 percent interest. If you only pay the minimum amount each month, it’ll take decades to pay off the debt and cost you thousands of dollars in interest.
Build a better habit: Devote every spare penny to getting rid of credit card debt. If you have other pressing debts, make a plan for dealing with all of them. For more tips, check out “Resolutions 2019: Crush Your Debt in 3 Simple Steps.”
Keep the balance from building again by making a new habit of paying off the entire bill every month — no exceptions ever.
2. Failing to fund a retirement plan
There are compelling excuses for putting off saving for retirement. But none of those excuses will matter if you reach retirement age with little saved. And, if you don’t take advantage of your employer’s matching contributions, you’re passing up free money every month.
Build a better habit: Imagine yourself at age 70 or 80. Picture concrete details — how you look, where you are, how you’re spending time and who is with you. The more real your future self is to you, the more likely you are to care for her or him today.
Start paying close attention to your retirement savings. If you can’t significantly increase the monthly contribution you make to your plan immediately, increase it by 1 percent a month. Once a year, check the performance of your investments and rebalance your portfolio.
3. Not shopping for monthly services
Hopefully, you comparison shopped before signing up for insurance policies. And we trust you did the same thing with phone, internet and cable services.
But you might be missing savings if you’re not checking prices again every year.
Build a better habit: Put some energy into improving your financial life. Once a year, spend 30 to 60 minutes price shopping for monthly services. To make it easy, keep a list with each company’s name, your account number and your monthly payment amount.
5. Ignoring coupons and deal sites
If you aren’t using coupons and checking daily deal sites, you’re spending too much. However, you still need to exercise discipline when bargain shopping so you don’t sabotage your good intentions with impulse buys.
Build a better habit: Tackle bad habits in small bites. Try just one deal or coupon site. Money Talks News’ deals page, for example, has new sales and coupons every day relating to clothes, shoes, electronics, tools and more.
Or try one of these:
- Explore grocery store apps that deliver coupons and personalized savings to your computer or smartphone.
- Look for printed coupons on grocery store receipts.
- Stop by manufacturers’ websites and look for coupons. Or, stop by Coupons.com.
6. Playing investing too safe
Safe investing is important. But there’s safe, and then there’s too safe. Keeping all your money in no-risk accounts means inflation will rob you of spending power slowly but surely.
Build a new habit: Don’t break all your bad habits at once. Pick one and focus. For instance, make managing your investments a priority. Learn your investing style by taking an online risk-tolerance quiz. Next, read up on the basics of investing. Then — taking your age and risk tolerance into account — take another look at your investments.
7. Getting hooked on lattes
That $4 latte is killing your budget. One such latte a day each workday adds up to $20 a week — $1,040 a year. If you tip a dollar each time, you’re spending $1,300 a year. There’s surely something you would rather do with that $1,000.
Build a better habit: Substitute new habits you enjoy for the old ones. A latte is a way of treating yourself, so find treats that don’t bust your budget.
8. Living without an emergency fund
If you don’t have an emergency fund, your life is a high-wire act with no safety net. Emergencies are inevitable. Life is full of them.
Build a better habit: Make a commitment to change. Write down your pledge and put it where you’ll see it. This will allow it to reinforce your resolve. Keep the change at the forefront of your mind and tell yourself continually, “I can do this.”
Commit and watch your savings build. If necessary, take on a few hours of extra work each week, whether it’s overtime at work or watching a neighbor’s dogs. For more tips, check out “9 Ways to Build an Emergency Fund When Money’s Tight.”
9. Buying retail
Paying retail markup is like setting a match to a pile of cash. Smart buyers find ways to avoid doing that.
For example, a new car’s value drops fast the minute you drive it off the dealer’s lot. So, buy something gently used instead.
One caution: There are things you should never buy used, including:
- Pet food
- Vacuum cleaners
- Stuffed animals
Build a better habit: If you feel pressured to keep up with your friends or neighbors, ask yourself what that’s costing you. Stay out of malls and brand-name stores except when researching products. Read up on prices online so you know a good price when you see it.
Shop at wholesale clubs and bulk stores, garage sales, consignment stores, thrift stores, online auction sites and classified ads. You’ll find especially good deals on used cars, refurbished electronics, jewelry, furniture, housewares, clothes, tools, books and sports equipment.
10. Using shopping as entertainment
Perhaps you know people with compulsive shopping habits. Maybe you are one of them. Spending creates a high that’s addictive and can severely damage your budget and the financial security of your family.
Build a better habit: Try spending fast. Remove your name from catalog lists, stay out of stores and hang out with friends whose idea of fun doesn’t include shopping.
Check out “18 Ways to Slam the Brakes on Costly Impulse Purchases,” for more tips.
Do you have tips for breaking bad money habits? Share them in comments below or on our Facebook page
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