I believe it’s much better to realize your problem as soon as you can so that you can take action towards changing for the better. Doing so can help you improve your financial situation for years to come.
Understanding your bad money habits and making a change can help you stop living paycheck to paycheck, eliminate debt, pursue your passion, save for your goals, reach retirement, and more.
Here are several bad money habits that may be making you broke.
Keeping up with the Joneses – what a bad money habit!
I’m sure almost everyone, at one point in their life, has felt the need to keep up with the Joneses.
Whether you are five years old and want that new toy everyone is playing with, or if you are 40 years old and are feeling the need to upgrade your house, car, etc., everyone has experienced it.
The problem with this is that keeping up with the Joneses can make you broke.
When trying to keep up with the Joneses, you might spend money you do not have. You might put expenses on credit cards to (in a pretend world) “afford” things. You might buy things that you do not care about. The problems can go on and on.
This can lead to a significant amount of debt.
Keeping up with the Joneses is not worth it because:
- You will never be happy, no matter how much money you spend.
- You will constantly compare yourself to EVERYONE.
- You will go into debt because that’s the only way you feel like you can keep up.
- You will have a loan payment for everything because that’s the only way you can “afford” everything.
- You won’t have any money leftover for retirement, an emergency fund, etc. because you’re spending it all on things you do not need.
Instead, you should figure out why you want to keep up with the Joneses, think about your own life and your own goals, realize that jealousy won’t get you anywhere, and try your best to live within your means.
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Letting your emotions take control of your spending.
Emotional spending is a bad money habit that many people take part in. It’s one you should stop, because it doesn’t cure any problems.
According to NerdWallet, the average US household (who has debt) has an average credit card debt of $15,611, and I’m sure some of that is due to emotional spending.
Emotional spending occurs for many different reasons. You may have had a bad day at work, a fight with your loved one, and so on. You might even be spending because you are so stressed out about the amount of spending you have done.
To end your emotion spending habit, I recommend:
- Figuring out the amount of debt you have. You’ll most likely be shocked, and hopefully this will persuade you to change your spending habits and the way you deal with stress.
- Understanding why you spend when you’re stressed. In order to stop stress spending, you need to really think about why you have this problem. Without understanding your problem, you might just keep falling into the same cycle over and over again.
- Thinking about your financial goals, so that you can stay motivated.
- Finding different ways to deal with stress.
- Sticking to a budget.
Not facing your debt.
Too many people never face their debt and don’t even know how much debt they have.
By not thinking about your total debt figure, it may seem less real and a way to run away from it. However, that will catch up to you in many ways, such as high interest charges, a bad credit score, numerous phone calls from debt collectors, possible paycheck garnishments, and more.
The first step to paying off your debt is to face it. You should add up your total debt, learn more about the debt you have, and create a plan to eliminate it.
Ignoring the importance of financial education.
Many people do not fully understand how credit cards work, how to improve their credit score, and more. However, if more people were educated on financial issues, this could lead to less debt, better managed budgets, and more.
I recommend diving into a good personal finance book, bookmarking your favorite financial blogs, staying up-to-date on the latest things going on in personal finance, and more.
Thinking you don’t need a budget.
Too many people go without a budget, because they believe they don’t need one. Sadly, many people believe that budgets are only for “poor” people, people who are horrible with money, and so on.
But, that just isn’t the case, at all. Nearly everyone needs some form of budget, even if that means just comparing your income and your expenses each month.
Budgets are great, because they keep you mindful of your income and expenses. With a budget, you will know exactly how much you can spend in a category each month, how much you have to work with, what spending areas need to be evaluated, among other things.
Budgets have helped people reach their goals, pay off debt, make more money, retire, and more.
Believing you’re invincible.
While I always try to stay positive and am a firm believer in the power of positive thinking, I do believe that everyone should have an emergency fund. However, many people have no emergency fund whatsoever, and this is a bad money habit.
There are many reasons to have an emergency fund:
- An emergency fund can help you if you lose your job. No matter how stable you think your job is, there is always a chance that something could happen.
- An emergency fund is wise if you do not have great health insurance or have a large annual deductible.
- An emergency fund is a good idea if you have a car and need repairs.
- An emergency fund is a need if you own a home. One of the lucky things that homeowners often get to deal with is an unexpected home repair. Having an emergency fund can help you if your basement floods, if a hole forms in your roof, and more.
Emergency funds are always good to have, because they give you peace of mind when something costly happens in your life. Instead of building onto your stress, you will know you can still afford to pay your bills and worry about more important things.
Being afraid of investing.
One of the biggest bad money habits is that far too many people are afraid of investing and never start.
Here are some reason to invest:
- You can retire one day.
- You never know what may happen in the future, so preparing now is important.
- You can allow your money to grow over time.
I always say, the first thing you need to do if you want to start investing is to just jump in. You’ll never learn unless you make an attempt.
If you are new to my blog, I am all about finding ways to make and save more money. Here are some of my favorite sites and products that may help you out:
- Start a blog. Blogging is how I make a living and just a few years ago I never thought it would be possible. I earn over $70,000 a month online through my blog and you can read more about this in my monthly online income reports. You can create your own blog here with my easy-to-use tutorial. You can start your blog for as low as $3.49 per month plus you get a free domain if you sign-up through my tutorial.
- Sign up for a website like Ebates where you can earn CASH BACK for just spending like how you normally would online. The service is free too! Plus, when you sign up through my link, you also receive a free $10 gift card bonus to Macys, Walmart, Target, or Kohls!
- Answer surveys. Survey companies I recommend include Survey Junkie, Swagbucks, Pinecone Research, and Harris Poll Online. They’re free to join and free to use! You get paid to answer surveys and to test products. It’s best to sign up for as many as you can as that way you can receive the most surveys and make the most money.
- Save money on food. I recently joined $5 Meal Plan in order to help me eat at home more and cut my food spending. It’s only $5 a month (the first two weeks are free too) and you get meal plans sent straight to you along with the exact shopping list you need in order to create the meals. Each meal costs around $2 per person or less. This allows you to save time because you won’t have to meal plan anymore, and it will save you money as well!
- I highly recommend Credible for student loan refinancing. You can lower the interest rate on your student loans significantly by using Credible which may help you shave thousands off your student loan bill over time.
- Cut your TV bill. Cut your cable, satellite, etc. Even go as far to go without Netflix or Hulu as well. Buy a digital antenna (this is the one we have) and enjoy free TV for life.
- Try InboxDollars. InboxDollars is an online rewards website I recommend. You can earn cash by taking surveys, playing games, shopping online, searching the web, redeeming grocery coupons, and more. Also, by signing up through my link, you will receive $5.00 for free just for signing up!
- Find a part-time job. There are many part-time jobs that you may be able to find. You can find a job on sites such as Snagajob, Craigslist (yes, I’ve found a legitimate job through there before), Monster, and so on.
- Lower your cell phone bill. Instead of paying the $150 or more that you spend on your cell phone bill, there are companies out there like Republic Wireless that offer cell phone service starting at $10. YES, I SAID $10! If you use my Republic Wireless affiliate link, you can change your life and start saving thousands of dollars a year on your cell phone service. I created a full review on Republic Wireless as well if you are interested in hearing more. I’ve been using them for over a year and they are great.
What bad money habits are making you broke?