It’s easy to understand why we fall into habits.
We don’t have the mental bandwidth to make conscious choices about every little aspect of our lives, especially when it comes to money. So, we revert to our habits and save the big decisions in life for things like whether to watch Game of Thrones or The Good Place.
Habits can either be a good thing or a bad thing, depending on the habit. If you fall into good habits, you’ll essentially set yourself up on autopilot for a bright financial future. But bad financial habits? Over time, these can push you further away from your money goals.
Here are eight bad financial habits to stay away from.
1. Allowing Entertainment to Drive Your Spending
There are just so many entertaining ways to spend your money. Whether you go out for drinks with friends every Friday or purchase outdoor recreation gear on the regular, your paycheck can be entirely swallowed before you can say the word budget.
Yet, while spending on what makes you happy is important (it’s not an entirely unnecessary expense, after all), you do run the risk of overspending. This can bleed money away from your long-term goals, like saving for retirement. After all, you still want to be able to afford drinks with friends once you’re retired, right?
2. Living the “High Life” Without the Means
Ah, keeping up with the Joneses. This one is especially hard to resist as you start moving up in your career. As you get each new pay raise, it’s easy to upgrade your lifestyle. After all, you worked hard and you deserve it, right?
But it’s easy to get out of control if you don’t watch things. Sure, that BMW might be nice today and you may even be able to afford it, no problem. But what about when you also upgrade your lifestyle with a fancy new apartment, HBO, and yearly exotic vacations? Before you know it, you could end up in a mountain of debt.
3. Emotional Spending
There’s a lot of weird psychological science going on when it comes to shopping. It’s a hobby, for sure. Many people spend a lot of time and money on it, especially when they’re stressed-out, feeling down, or celebrating a lot of wins.
The unfortunate thing about emotional spending is that while it does lead to quick little boosts of happiness, in the long term it’ll dump you like a bad ex. That’s because it makes you more likely to spend past your limits, sucking money away from other goals and potentially putting you further in debt.
4. Not Saving for Emergencies
This is one of the biggest mistakes of all. If you’ve gotten this far in your life, you know that it’s not a question of if something bad will happen, it’s a question of when. An emergency fund is your best protection against a future bad event, whether it’s a job loss, a pet getting sick, a car breaking down, or an infestation of bees.
The biggest threat from not having an emergency fund is that you may go into debt to pay for whatever bad thing happens. But, by saving money in advance, not only can you gain some peace of mind, but you’ll also be able to afford those unexpected expenses without going into credit card debt.
5. Not Paying Off Your Credit Card Bill Each Month
Did you know that paying off your credit card bill in full each month means that you won’t have to pay any interest? It’s true. This is especially helpful when it comes to playing the credit card rewards game, because then you can truly earn your rewards without turning it into a losing proposition.
Furthermore, if you don’t pay off your credit card bill in full each month, it’s easy to put it off and rack up even more charges on your card. After all, you’re already in debt, so what’s a few more dollars? Over time, though, this mentality can land you in a whopping pile of credit card debt — not a fun prospect.
6. Not Saving for Smaller Goals
Sure, everyone is always stressing the importance of saving for emergencies and for retirement. They are two of the most important savings goals for most people.
But another mistake is not saving up for all of your other micro-goals. We’re talking about things like saving up for a new car, summer vacation costs, health care expenses, a down payment on a house, or holiday gifts. You know these expenses may be coming up (for better or worse), so why not start saving now?
7. Not Tracking Your Expenses
One way to guarantee that your dollars fly out of your wallet faster than Flash Gordon is to not track them.
You don’t necessarily need to create an elaborate budget or enter in every last purchase by hand each day. But it is a good idea to at least sign up for spending alerts through various apps like Mint or Personal Capital. This way, you’ll at least be warned when you’re spending too much money.
8. Letting Autopilot Run for Too Long
When it comes to your finances, it’s best to reassess your goals every six to 12 months and take a good, honest look at your financial goals. Then, you can dial into your expenses to see if your spending is matching up with your priorities.
It’s a good idea to shop around for new products at this time too. Can you get cheaper car insurance rates elsewhere? Are you still using your Amazon Prime subscription? Can you lower your dining out budget by just a tad, or are you happy with where it’s currently at? Should you shop for a new bank account if you’re currently paying fees?
Are You Ready to Drop Those Bad Habits?
If you’re ready to change your money habits, you can start by referring to this list of risky habits that aren’t doing you any favors. Then, re-evaluate your goals and adjust them accordingly. From here, you can tweak your bad financial habits and drop them like…well…a bad habit.