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What Bad Financial Habits Do You Have? Part 1

Last Updated: BY Michelle Schroeder-Gardner - 89 Comments

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Everyone most likely has some sort of bad financial habit that they take part in. Now that my student loans are paid off, I have been evaluating the many other financial areas in our lives.

No one is perfect, and I definitely am not. I know that I share my weekly and monthly extra income all the time, but a bigger income does not mean that all financial worries are gone! This larger income has only been happening for less than one year, and before that we were very used to a relatively small amount of monthly income and living on a small budget.

Everything hasn’t been easy or peachy in our lives (long-time readers are well aware of this), but we have been focusing on being more positive.

So today’s post is important because not all personal finance bloggers are perfect with their finances, and I also need to be more realistic on my blog and share my downfalls as well 🙂 Hopefully you can learn from my mistakes!

I originally made this post and it was well over 2,000 words, so I decided to split it up.  Be sure to look out for Part 2 in the next couple of weeks! Below is the list of bad financial habits you may be taking part in:

1. Paying yourself last is a bad money habit.

I’m guilty of not paying myself first. I should be designating a certain amount for savings, but I haven’t done that in a long time. Debt payments have definitely taken over, and before that, I still wasn’t paying myself first.

Before we started to aggressively attack my student loans, we were paying ourselves dead last. We would spend money throughout the month, and whatever leftover is what we would save. Big mistake!

 

2. Buying things that you don’t need

Everyone classifies “needs” and “wants” differently. When was the last time that you bought something that you didn’t need, and probably can’t afford? We definitely have things that we don’t “need.”

While I am fine with our purchases, every now and then it is hard to not sit back and really wonder if it is all worth it (i.e. our 2013 Camaro 2ss). Many people think that we are very stupid for getting this.

I do regret one car purchase 100%, and that was buying a Scion tC right out of high school, and buying it brand new. UGH! $400 car payments at the age of 18? I wouldn’t wish that on my worst enemy. It probably wouldn’t have been so bad if I lived at home, but I didn’t have that option. So along with $400 car payments, I was also paying for my own rental house, food, a new puppy (we still have her, no worries!) and so on. Our budget at 18 was much larger than what we were making.

However, I do think that money should be enjoyed as well. As I will talk about in August in Part 2, I don’t think you should let money control you. Money shouldn’t be a negative thing in your life. If you are good with your finances, why not enjoy some of your money as well? I am guilty of letting money run my life, and I will think about every little purchase and whether or not I am “worthy” of it.

We have also taken some pretty un-frugal vacations. I could have paid off my student loan debt so much quicker! However, I do not regret the vacations that we have taken.

 

3. Not knowing your true worth and feeling stuck

Are you stuck in a dead end job? May it’s a job you do not like? When was the last time that you asked for a raise? I am guilty of feeling stuck. While I am only 24, I have been feeling this way for quite some time (I’ve been working full-time for about 10 years now). It is hard for me to be more “free” and forget about my responsibilities, but I do have others who are counting on me.

I don’t have anyone that I can realistically rely on or turn to (yes, W counts, but I am thinking more in terms of parents and/or grandparents), and I do think this is why I have always been a worrier. If something did happen, I don’t have anyone that I can ask for “help” from, which then makes me choose the safer options in life. And then this leads to me feeling stuck.

However, my situation has also made me stronger, and without everything that has happened in my life I doubt I would be where I am.

 

4. Going without an emergency fund

Everyone has different opinions on this, but I do think that everyone should have some sort of emergency fund. Having too large of an EF can also be a downfall, and I know that because I waited so long to pay off my student loans, even though the cash was in the bank to do so.

What Bad Financial Habits Do You Have? Part 1

5. Thinking that you will work forever and not need retirement

There are so many people out there who seem to not be worried about retirement. We haven’t started aggressively saving for retirement (we have a little, but we fell behind as we were more worried about student loan debt), but we do plan on changing this. Lots of young people think that they don’t need to start worrying about retirement until they are older, but why wait? What is stopping you from saving money right now?

You never know if something may happen. No one wants to think that the absolute worst will happen, but a medical issue may arise. Saving for retirement now can you help with something that may come up in the future that may prevent you from working.

 

6. Not taking a realistic look at your budget

Do you just throw in a guestimate for certain items in your budget? Such as food? We used to. We had an amount that we ideally wanted to spend.  However, this is not the correct way to make a budget! This can also apply to your entertainment or fun budget.

We used to spend so much on food, and I still don’t like sharing the amount on my blog because I am ashamed of it. It was crazy! And such a waste.

Do you do any of the above? Do you have anything else to add to the list?

 

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About Michelle Schroeder-Gardner

Michelle is the founder of Making Sense of Cents, a blog about personal finance and traveling. She discusses how her business has evolved in her side income series. She paid off $40,000 in student loans by the age of 24 mainly due to her freelancing side hustles. Click here to learn more about starting a blog!

Comments

  2. Alexa says

    I feel stuck in my job. I know there is no room for growth so I have been considering other options. I also don’t pay myself first which is a habit that I would like to make. I have gotten better at weighing wants vs needs though.

    Reply

    • Michelle says

      I have definitely gotten better at weighing wants vs needs as well. It is almost bad though because I feel like I don’t have any “wants” lately!

      Reply

  3. DC @ Young Adult Money says

    I think “not knowing your true worth” has been something I’ve struggled with in the past. It’s so hard when you are in your 20s and feel like you don’t compare knowledge-wise or skill-wise with people who have been working at the company longer than you. In reality, there are plenty of people who haven’t worked as long as other people can easily be more talented and produce more value.

    Reply

  4. Sam says

    So wierd Michelle! I bought a brand new scion TC when I was 18 right out of high school too. Worst decision I ever made! However, it’s paid for now, i still drive it & actually like it. I learned that I never want a car payment again that’s for sure. I do a spreadsheet each month with my budget broken down, but I can be guilty sometimes of paying myself last if unexpected expenses pop up during the month. Another budget system I found that I reall like is the envelope budget system from fun, cheap or free queen. It’s a little different than Dave Ramsey’s system as its not cash… Check it out! It might help some of your readers.

    Reply

  5. Andy Hasdal | Income by Example says

    I always used to spend if anything I wanted came knocking. Everyone’s doing this 5k? I will too! Another online sale? I don’t need new clothes but what the heck? It’s only now that I’m starting to take better care of my finances and learning to say no to things that aren’t really necessary.

    You don’t want to get too caught up with the following thought, but it does help: Every time you want to buy something new, just think about how much that money can help pay down debt or how much it’ll be worth in the future. $100 shoes don’t cost $100. It’s the future value of that money that’s the real cost.

    Reply

  6. Liz says

    Paying yourself last definitely strikes a chord with me since we are working on paying off our student loans too. However I do feel like we are getting somewhere when we make those extra payments!

    Reply

  7. Tara says

    Miscellaneous expenses, especially food have taken over our budget. It’s sad how much I can spend at Costco! (we just spend $186, but that is for the next four weeks too). I realized I had FORGOTTEN about meat in the freezer! How sad is that? So now I make an effort to cook whatever meat I have and ensure I take it out of the freezer in time. I know if I didn’t start getting serious about budgeting for food, I won’t be able to crack down on my student loan debt, and I definitely need to!

    Reply

  8. Mark Ross says

    Unfortunately for me, I’m guilty on some of those, most notably the buying unnecessary things part. I can’t seem to stop it but I think I’m showing some improvement because I’m now only buying less those kind of stuffs than before. That’s what I think of, though.
    I’m really curious what’s on part 2, I hope I don’t commit a lot of them.. 🙂

    Reply

  10. Monica @MonicaOnMoney says

    Great points Michelle! One of my biggest mistakes was that I didn’t have an emergency fund for years. So I was always struggling to budget whenever I had another car breakdown (my car is 9 years old). Now that I have an emergency fund, life is much less stressful!

    Reply

  11. SavvyFinancialLatina says

    I understand when you say you are a worrier. I have my parents, but they don’t have much money, so it’s not like I can take off and travel the world, and rely on my parents. It’s been a while since my parents have given me money, and it’s usually me giving my mom a little bit of money, so she can buy groceries, and medicine.

    Reply

  13. Mr. Utopia says

    My weaknesses:

    1) Not knowing true worth – well, I think I have a ballpark assessment of it, but I work at a bureaucratic Fortune 50 company and I’m too complacent (and often powerless) to do anything about my situation.

    2) Not doing a budget – I’ll put together an ad hoc, macro budget every know and then to gauge average cash flow. However, I’ve never sat down and constructed a detailed line item budget. I never considered it that beneficial, but perhaps I should reconsider.

    3) Splurging on the baby – Ok, this is really a weakness more for my wife than me! Kids are expensive, of course, but I constantly marvel at how much money goes out the door for our 11-month old. Every time my wife steps out the front door she comes back with some sort of purchase for our little guy!

    Reply

  14. Keren says

    Guilty! We have a very small EF (around $250) but I build it as I can. I also have “Project Savings” account for home repairs with about the same balance. Aaaannnnddd, I have definitely purchased things I wanted rather than needed…like the 2012 fully-loaded minivan I drive. Sigh.

    Reply

  16. Morgaine says

    Our worst financial habits are eating out too much and being impulsive. I’ve bought quite a few things that I didn’t need, didn’t intend on buying, and weren’t in the budget. I don’t like to wait!

    Good list Michelle!

    Reply

  17. Allison says

    I think we have not been realistic with our budget these past few monts. We never included money for clothes, and our budget was pretty much bare bones. The problem is, we are not living bare n
    Bones. We have good jobs, and our only debt is our mortgage. So, we really need to reevaluate and be realistic.

    Reply

  18. Liquid says

    I’m guilty of most of those habits, but I don’t think they’re necessarily all that bad because sometimes it’s nice to have fun and not feel too constrained. I think if you can stick to a budget (even a rough one) then paying yourself first doesn’t really matter since your expenses are more or less fixed anyway, and is ultimately what determines how much you save. I don’t have any emergency fund either. The purpose of an EF to me is to provide liquidity 😀 If someone has multiple sources of income, they may not require any more liquid assets to get through a financial crisis.

    Reply

  19. CF says

    I’m pretty good with the ones you listed. What I am bad at is submitting receipts and claims promptly for benefits or savings. I just absolutely hate paperwork and I don’t get around to it for ages.

    Reply

  20. John@MoneyPrinciple says

    In theory we put a bit less than 10% in our ‘fun’ fund but still don’t get round to spending it all. On the other hand we could say that is for holidays and the fun all comes rolled up but I think it is better to do something every month as well as holiday. The retirement thing we dealt with some time ago and also the best time to invest. Take a look.

    Reply

  21. Andrew@LivingRichCheaply says

    I agree that sometimes you have to indulge in luxuries if it fits your budget. I bought a tablet recently, it was on sale and I had some reward points on top of that. I don’t need it but it’s nice to have.

    Reply

  22. Newlyweds on a Budget says

    One of my favorite things about you is how realistic you are toward money. Yes, it is about paying off debt, saving money, but it is also about ENJOYING THE MONEY YOU EARN. I get SO sick of reading personal finance blogs sometimes that are all about not spending money EVER and never going out and never enjoying anything that you work for. It sickens me and I roll my eyes and move on. I’m glad you bought that car. Because you enjoy it and it brings you happiness.

    Reply

  24. CeCe @Pink Sunshine says

    We all have different priorities when it comes to those splurges that are more wants then needs. I think spending money on cars is a waste but others may think I’m nutso for having spent $150 on a pair of jeans. I have a co worker who spends $800 a month on groceries plus eating out for 2. Is it more then that? We pay ourselves first but my only concern is that it’s not as high as it should be. I definitely need to take a hard look at that. No one is financially perfect.

    Reply

  25. Francieidy says

    “We had an amount that we ideally wanted to spend. However, this is not the correct way to make a budget!” This is an interesting thought. Could you maybe do a post on the correct way of making a budget, cause right now that’s what we do. We just sort of guestimate our food and enterntainment. We’re not in debt cause of it or anything, but I’d love to get better at budgeting.

    Reply

  26. Matt Becker says

    I have a tendency to make impulse spending decisions when I’m in a non-routine situation, especially any kind of vacation, or at this point even the occasional night out. Although this isn’t the worst thing in the world, I would like to be more conscious with decisions. I also have a resistance to change, which isn’t strictly a financial weakness but has repercussions for finances as well as life in general. It can certainly drive my wife crazy.

    Reply

  27. Crystal says

    Yeah, we were on the ball financially from age 23 through 27, but now we have a few bad habits. We also make more and can afford those, but I would like to reel some of it in. For example, we used to make so little that we stuck to our food budget like our lives depended on it. Not so much now… We also prioritized retirement savings before and now I am all about saving cash for more rental properties. We’ll see…

    Reply

  28. Madame says

    Really enjoyed this post! For the most part I think I am pretty good at saving and budgeting, but when I do make purchases that happen to stretch the budget, they often stretch the budget way too much.

    Reply

  29. Budget and the Beach says

    I think the last one you mentioned is something I struggle with. I’d “like” to have my budget be a certain amount for food but I’ll be damned if I don’t go over that amount each month. That was going to be a question I was going to have for readers on Thusday…about allocating funds. As far as the worry thing again, the best way to combat that is to come up with a plan. And then a plan B, and then a plan C if you need it. I’ve struggled with my freelance income, but since I beams more financially savvy I have less stress because of have my own back up plans to pay for rent and such (and that doesn’t mean relying on anyone else either). It has helped reduce financial stress A LOT!

    Reply

  30. The First Million is the Hardest says

    Not knowing your true worth is probably my worst habit. I’ve delayed job changes multiple times in the past out of fear of the unknown and underselling my true abilities to myself. Sometimes its even comfort & laziness that have prevented me from earning my true worth.

    Reply

  31. Mama Needs Money says

    Good reminder about not letting your money control your life; I am guilty of that one at times. And feeling stuck at times, that too.

    Reply

  33. E.M. says

    I am guilty of over thinking purchases, even the smallest ones. It’s no wonder I spend hours in stores! I’ve done this since I can remember, which is kind of sad. What ten year old sits there debating whether or not to get a shirt that she wasn’t even paying for? I need to dial that back. I’ve also felt stuck – in fact, I do right now. Hoping things will look up in the next month or so. I also regret buying so many beauty products because they weren’t needed. I should have been paying extra toward my student loans! Better late than never 🙂

    Reply

  34. Michelle says

    The item on your list that I am terrible at is saving! I am able to save for vacations or long trips abroad but I think I’ve psyched myself out whenever I think about saving for an emergency fund.

    Reply

  35. Michelle says

    The item on your list that I am terrible at is saving! I am able to save for vacations or long trips abroad but I think I’ve psyched myself out whenever I think about saving for an emergency fund. I’m finally making it happen, but I had a serious mental block!

    Reply

  36. Glen @ Monster Piggy Bank says

    I’m loving that facebook image and having known someone that last year passed away from cancer I can tell you that treatments are expensive.

    Anyway, I think I am pretty good at most of the things you listed. If anything I think I probably over analyze everything and think that I am worse off than I actually am.

    Reply

    • Michelle says

      Yup I love that image too! And yes, my dad passed away from cancer, and the costs add up quickly. Also, working is not an option, and that can really drain your finances.

      Reply

  38. Kraig - Young Cheap Living says

    Michelle,

    Oh, yes. I have many bad financial habits, although I’ve gotten rid of most of them. The ones I’ve gotten rid of are:
    – smoking
    – buying the latest electronics gadgets and frequenting Best Buy
    – buying pop (soda) daily and drinking a lot of it
    – going out to eat almost daily
    – financing $20,000 cars and racking up credit card debt

    Although I’ve gotten rid of those, here’s what I continue to do:
    – spend a decent amount on alcohol
    – drive a lot even when I could ride my bike
    – make impulse purchases that I feel bad about afterword

    All in all though, I’m doing well on the bad financial habits. Most would call in INCREDIBLY CHEAP, so I must be doing okay. 🙂

    Reply

  39. Michael says

    Looking forward to part 2 already. I have several bad habits and I am trying not to overload myself by trying to break them all at once. I have a general budget based on what bills are due when and I try to stick to it. What gets me is when the bills are paid and I have money left over, I waste it.

    Question, when you say “we started to aggressively attack my student loans”, are you saying that he made payments towards your loans as well? How did you guys work that out?

    Reply

      • Michael says

        Oh, ok. That makes sense. We’re not at that stage yet. Although he keeps mentioning opening a joint account. Personal thoughts on that?

        Reply

        • Michelle says

          Waiting until you both are ready is my best tip. Make sure to talk about money, your goals, whether a prenup is necessary, how expenses will be handled, and so on.

          We have had joint finances (we bought a house and everything else in both of our names), and have been doing this for years now. It has worked out well for us!

          Reply

  44. Adam @ Debts & Dollars says

    I’m a deal shopper which means I do like to shop online quite a bit. I give myself a small spending budget for the month to avoid getting carried away with over purchasing stuff I think I “need.” I work hard for my money and I don’t see any reason not to enjoy a small percentage of it while I manage to to tackle my debts at the same time.

    Reply

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