Imagine a world where you can afford to take that perfect vacation and give generously to others. This does not have to be a dream as you can turn those wandering ‘what-ifs’ into reality simply by breaking just a few bad financial habits. Habits are the things we do over and over again without even thinking. But they end up shaping our lives, both for the good and the bad. So, let’s make sure it’s for the best.
- Money mistakes to avoid
It’s always a good idea to identify your psychological and emotional triggers, so you can eliminate the opportunity to overspend. But, let’s make sure you avoid the most common spending mistakes altogether.
Spending more than you earn
This is THE cardinal sin of personal finance as you will need to rely on credit to cover your expenses. The credit comes with interest and ends up trapping you into debt. Credit is expensive and if not used properly, it places you in a vicious circle.
Not tracking your spending
In a digital era and fast-paced society, it is easier than ever to lose track of payments. But they will come back to bite you at the end of the month. Think about it, a small expense such as a morning latte of $4.00 a day adds up to $120 a month.
Not being prepared for an emergency
Man plans – God laughs. As long as we live, there will be unexpected events and expenses are no exception. An accident can happen, a job can be lost, or an appliance can break. Being financially healthy means being prepared for unexpected circumstances.
Impulse purchases
Whenever we’re upset, stressed or anxious, we often turn to retail therapy, only to find out money cannot buy happiness. Stay away from these spur-of-the-moment purchases and turn to yoga instead in moments of crisis.
Mindless shopping
If you find yourself browsing online shopping sites as you’re waiting or commuting? If you end up buying even something small every time you’re stuck waiting, you’re in trouble.
Paying your bills late
This happens to even the best of us. But try to avoid it at all cost as it causes your credit score to plummet besides costing you more in interest charges and late fees.
Blaming others
“Life isn’t fair” is a phrase we’ve all heard before and one we’ve likely said to ourselves. But, thinking grass is greener somewhere else won’t get you anywhere. Accept your circumstances and play the cards you have been dealt with. This is the only way to take your life into your hands and actually make a difference. If you tend to spend more money than you normally would when you are with your friends, learn that “no” is a complete answer.
2. How to improve your spending and money habits
Getting rid of a bad habit won’t get you far unless you replace it with a healthy one.
By putting good spending habits in place, you’ll eventually make smart money choices without much thought or effort.
Budgeting
Creating a budget will allow you to track your expenses and help you achieve your money goals. Moreover, it will help you identify areas where you can cut costs such as your utility bill which usually eats up the biggest portion of our monthly expenses. Energy providers such as Reliant Energy have many different plans in place and the rate you choose could end up bringing you savings of several hundreds of dollars on a yearly basis.
Invest in a coffee machine
Although picking up a Caramel Macchiato on your way to work can be an energizing ritual, it is significantly draining your budget. Just think about it, a $4 drink each morning adds up to $1,020 a year. But you can obtain the same coffee quality by investing in a home machine that will cost you less than $20 cents per cup, all you need is a bit of creativity to make the ritual just as enjoyable.
Eat in
There’s nothing wrong with eating out now and then. But the average American spends just over $3,000 a year on restaurants and take out. Maybe you’ll feel more inspired to pack your lunch more often considering this figure can be allocated to a dreamy vacation or a home improvement project.
Reconsider subscriptions
Paying for subscriptions that you’re no longer using can eat away at your bank account. Some you could have easily forgotten about so make sure to go through them and revaluate if they are truly necessary.
Final wordWith a little sacrifice and a lot of discipline, a dream vacation won’t seem so unrealistic. Big financial goals such as college tuition will start to resemble a molehill more than a mountain. Replacing bad spending habits with healthy ones will quickly make a difference to your bank account. You will know you’re on the right track when generosity becomes your natural state, as there will always be at least something you will gladly give to others once you get rid of unnecessary vampire expenses.