It can take a lot of time and experience to develop great financial habits. When you have your finances in control, you can stay out of debt, maintain a strong credit score, and you can get the financing you need for large purchases such as a car or even a home!

When people run into financial trouble, it’s typically because of many bad decisions that have piled up to create a lot of issues. To help protect your finances, you need to be able to notice bad habits and understand the ways in which you can avoid making those types of mistakes on a regular day. It’s okay to make financial mistakes, we all do it. But, it’s not acceptable to allow the mistakes to continue and turn into bad habits.

Overspending With Credit

It’s not a bad idea to have credit card accounts that are available for you in emergency situations. However, when you use those credit card accounts to develop spending habits that exceed your monthly income, then you are headed down the wrong path, and you need to break this bad financial habit quickly.

The solution to this problem is to use credit in a responsible manner. Don’t ever purchase something on a credit card that will take longer than three months to pay off. If you are only making minimum payments on your credit cards each month, then you are heading down the road to financial disaster. You need to understand your own finances and prevent yourself from making credit purchases that will create monthly payments that go on for years.

Another good approach is to create a savings account that you specifically use to make purchases that you’d normally purchase with a credit card. For example, if it’s finally time to replace the refrigerator, it’s much better to save up to buy it with cash than to use credit. That way you will know that you actually have the funds and won’t have to worry about paying it off. cred.jpg

Neglecting A Monthly Budget

Many people find themselves over-extended with their monthly bills because they have no idea how much they really need to spend each month to pay bills and meet their expenses. The best way to monitor your monthly spending is to utilize a budget! You’ll find that most people who do not use a monthly budget are also the same people that are drowning in debt.

A budget can be something as simple as listing all of your bills and expenses on a piece of paper each month and then scheduling payments based on your monthly paychecks. There are many computer programs available to help people create and maintain a successful monthly budget. Neglecting to use a monthly budget is a very bad financial habit to get into.

Impulsive Buying

People will sometimes joke with each other about impulsive buys they make when they go shopping, but impulse purchasing is an awful financial habit to bury yourself in. Impulse buying means to purchase products that you want, but do not necessarily need. Most people don’t track their impulse spending and the results can be hundreds of dollars being carelessly spent each month and only deepens the hole created by crippling debt.

In order to avoid impulse buying, you should plan each shopping trip and only buy what you need. If you do need a little extra help with controlling your impulsive spending, then only bring with you the cash you would need to make your planned purchases and leave your ATM card, checkbook, and credit cards at home! This might be hard, but you’ll thank me later.shop

Overspending on Monthly Expenses

Are you someone who stops on the way to work and spends $4 on a coffee in the morning? It seems really harmless, but it is actually a very bad spending habit. That $4 coffee represents $20 per week in added expenses, which becomes a lot of money per year in money lost. If you would bring a coffee from home, you could save that money and apply it towards bills.

It’s easy to allow your expenses to get out of control, but it’s just as easy to curb your spending and make sure that you’re only buying the essentials. To help in curbing your expenses, you should track all of your spending for one month to determine what you buy, spend, and then decide what you really need. For example, you may see in your log that you are wasting money each week on the morning coffee and buying lunches at work. With real numbers from your expense tracking, you can determine just how much money you’re actually wasting! It’s easier to develop good financial habits when you see how much damage the bad habits are doing in writing.

Missing Monthly Credit Card Payments

If you’re in the habit of making your credit card payments late each month, you probably figure that as long as the credit card companies get their money before the end of the month, then there is no harm done. However, the truth is that you are actually doing several bad things to your finances when you do not make your credit card payments on time every month.

Every time you miss a credit card payment, the creditor adds a late fee to your payment and increases your interest rate. It’s very common for a late fee to run anywhere from $30-$50 each month. That increased interest rate is also applied to the late fee, which causes you to lose even more money!

Late credit card payments damage your credit score. One of the easiest ways to destroy your credit is to make a habit of paying your bills late. One of the easiest ways to fix your credit is to get into the habit of paying your bills on timebills.jpg

Neglecting Long-Term Planning

Are you planning on retiring someday? What have you done to prepare for those golden years when you will no longer be generating an income through your career. If you have a retirement plan through your job that you are enrolled in (that’s awesome), are you sure it will give you the income you need to retire comfortably?

The bad financial habit people get into is treating retirement like an afterthought. People will set up their retirement accounts and start putting money in it without even knowing if it’ll be enough to survive. It’s important to get into the good habit of talking about your retirement with a certified professional and make long-term plans that are smart.

No Contingency Planning

During the course of a month, just about anything can happen that could suddenly put you in a financial bind. Many people get into credit trouble cause they’re unprepared for financial challenges and rely on their credit cards to get them out of trouble. These are the kinds of bad financial habits that put people deep into debt and cause years of financial headaches and heartaches. </3

The simple solution here is to start a savings account that is specifically set aside for emergencies. This is different than the savings account we discussed earlier that is used to set aside money for larger purchases. That account is actually used in conjunction with careful planning and consideration for future needs. The contingency savings account is an account that is there to take care of problems without using your credit cards! Smart thinking. 🙂

Not Planning For the Future

Have you come up with financial plans to help take care of the needs of your loved ones in the future? Many people make huge changes to their lives like getting married or having children without financial planning. This is how people can get overwhelmed with debt and find themselves in desperate situations.

A good example is the need to send your new child to college. When a child is born, a parent might not be thinking about the costs that will be associated with sending that child to college someday. However, if that parent doesn’t take advantage of the 17-year window they have between the birth of their child and the day the child goes to school, then there will be financial issues after the child graduates high school. Today, college costs an arm and a leg.

The best way to plan for the future is to take advantage of the years you have to set aside as much money as you are able. Start a college tuition fund for your child the day that child is born and make a small contribution to that fund each month. By the time your child is ready for school, you’ll have the money you need to get your child the best education for them.college

Redundant Spending

Do you have a cell phone and a landline home phone? Why do you pay for cable television channels and stream movie services through your Internet provider? Redundant spending is a matter of not making the correct choices with the products and services that you pay for. Which in turn causes you to spend money that you do not need to spend.

Take a look at the services that you already have and get rid of any service that’s redundant. Before you purchase a product, think if you already have a product that can do the same things and save yourself the money!

Not Taking Advantage Of Better Pricing

Is it really necessary for you to buy a brand new car this year? You can save thousands of dollars by buying a reliable used car and still get the same quality of transportation that you get with a brand new vehicle! If there’s one bad spending habit people become guilty of, it’s not taking advantage of all of the great pricing deals that are available.

Instead of purchasing a brand new product, consider buying something reconditioned or used. Check with your retailer to see if you can trade in your old product and get a discount on a new purchase and always take advantage of discount coupons whenever possible! There’s a good chance that you’re spending hundreds of dollars that you don’t need to spend and it’s a really bad financial habit that you need to break ASAP.

Neglecting Product Maintenance

If you invest in regular oil changes for your car then you can decrease the amount of money you spend on gas and extend the useful life of your vehicle! If you get your furnace maintained by a certified professional once a year, then you will save money on your energy costs and extend the life of your furnace!

Simple product maintenance procedures can save you lots of money on both repair and replacement costs. For example, if you have a roofing expert inspecting your roof each year, then the expert can recommend relatively inexpensive repairs that will protect your home and prevent a large replacement bill.

Great spending habits can put more money in your pocket and make your life a ton easier. When you understand the steps that you can take to keep your finances under control, then you can avoid debt and the stress that comes with it!money honey.jpg

Good luck with your smart financial decisions!

-Lauren L.

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