We’ve all got a few bad money habits – money’s there to be spent, right? This year, however, it’s time to take control of your finances and create a game plan that will see you managing and accumulating wealth better and faster. Here are some money habits to break and saving habits to make going forward:
1. Making late payments
Whatever those monthly payments are, be sure to make them on time to prevent wasting money on interest or fines. Set up automatic online payments or calendar reminders to keep you in good stead with your service provider, landlord, etc. and never waste another cent on unnecessary penalties.
2. Paying the monthly minimum on your credit cards
Credit cards typically charge exorbitant interest rates (±20%) and, therefore, you should prioritise squashing that debt. This means making the maximum monthly payments possible or even paying off the debt completely if you can. You may think that paying the required 1 to 3% per month is a great deal until you realise how much money credit card debt costs you in the long run!
3. Putting off investing until “you have the money
You don’t need a fortune to get invested. Rather, fortunes are built on investing small amounts of money every month, which then accrue compound interest. That’s why it’s called “building wealth”. It doesn’t happen overnight, so stop making excuses, set up an appointment with an investment company (or your bank), learn what’s on offer and make a start. You can always work your way up through their investment options.
4. Not having a savings goal
If asked right now what amount you strive to save every month, would you have an answer? If you can’t provide a definite figure, you don’t have a savings goal and it’s time to get one. Write a detailed list of all your essential monthly expenses (car, rent, food, education, etc.) Whatever you have left of your income should go into a savings account, with the exception of a small percentage, which you can put towards entertainment. Decide what your savings goals are (write them down) and make provision for them.
5. Dipping into your savings
Your retirement account, emergency savings fund, investments... you should never dip your fingers into your short and long-term savings accounts, unless it’s an emergency. There are many ways you can tighten your belt during leaner months and you’ll have to learn to live more conservatively, rather than touch your savings.
6. Disregarding the little expenses
You might consider stopping for a take-away coffee every morning, taking an Uber to the club on weekends, and eating out for lunch every day necessary lifestyle expenses, but they add up and can be a considerable drain on your income. Make an itemised list of every single one of your expenses and you’ll appreciate just how much money you’re wasting on unnecessary items and luxuries. Tighten your belt accordingly.
7. Impulse spending
If you’re an impulse buyer, it’s time to learn to curb the habit because it puts undue strain on your finances. It’s also a leading cause behind credit card debt, which is expensive. One way you can curb the “buyer’s fever” is to keep a list of the items you want, as well as the date on which you found them. Wait 72 hours (or 30 days depending on what works better for you). If you still want it after that time, save up for it and buy it.
You don't need to live a financially virtuous existence to manage your wealth effectively, but by confronting your bad money habits and adopting positive saving habits, you’ll find yourself happier and wealthier by the end of the year and moving forward!