5 Bad Money Habits–And How to Get Ahead! 🙌
The whole world is buzzing about the U.S. Debt Ceiling. Now hopefully none of our readers are $31 Trillion in debt, BUT there’s still a valuable lesson here–this didn’t happen overnight, or even over the course of a week. It takes time to get into debt, and it takes time to get out of debt.
Success in any area comes down to your habits. It’s important that you identify the good, and the bad. So today, we’re going to dive deep into bad money habits that could be holding you back – and more importantly, how you can turn them around.
Bad Habit #1: Not Managing a Budget
If you don’t know where your money is going before you spend it, you have a problem. You know that old saying, “small leaks sink ships”? That applies to money, too. Those impulse buys might only be $20 here, $50 there, but when you total that up at the end of the year–what’s your number?
And even more importantly–is there anything you would rather do with that money if someone were to present it to you right now?
My tip is to always pay yourself first. Decide how much you want to save every month, and then set that aside before you have the chance to spend it. From there, you can base your “fun” money on what’s left after bills and savings.
Bad Habit #2: Borrowing Money Often
It’s true that many people rely on borrowing money, using loans and credit cards to cover unexpected expenses. However, this should be viewed as a symptom of poor financial planning, not a desirable habit.
Poor planning can lead to an unsustainable cycle of debt, with interest rates adding up quickly and making it difficult to pay off the original balance 📈 A good place to start is to sit down and figure out why you’re borrowing money and where it’s going. Oftentimes, borrowing money is a symptom of not having money set aside for non-essential spending.
💸 Commonly unplanned costs to consider:
- Home or car maintenance
- Healthcare deductibles
- Gifts and celebrations
- Field trips and events for children
- Groceries for holidays and parties
- Clothing or personal hygiene items
- Rising costs of inflation and essential bills
These are in addition to emergency expenses, which could be any number of things. Only 49% of Americans are estimated to have at least $1,000 in savings. Between the constant flux of unplanned costs and emergency situations, it’s easy to fall into the trap of borrowing money often. However, there are ways to break this habit.
My tip is to start building an emergency fund. Even if you can only save a small amount each month, it’s better than nothing. Having money set aside for unexpected expenses can prevent you from having to rely on credit cards or loans. And if you do have to borrow money, make sure you have a plan to pay it back as soon as possible.
Bad Habit #3: Lending Money Often
“Neither a borrower nor a lender be.” We all have that one person who we love to death, but they’re simply not good with money. If you can loan money comfortably and you want to, then do it. But if it’s starting to put a strain on your finances or relationships, you might have a problem.
For that reason, it’s important to keep track of how much you’re lending, and how often. When the lending starts to cut into your savings contributions, it’s time to get creative 👇
Alternatives to Lending Money
Offer to Pay a Bill
This is a great option if you suspect that your friend isn’t being responsible with borrowed money. In this scenario, you can still help and have a little more confidence that they’re getting by.
Help with a Chore
Maybe there’s something you can do to help that will completely eliminate some of their financial burdens. Not everyone owns a lawn mower, home repair tools, or even cost-effective tutoring for their children. If you feel comfortable pitching in, this could be a good short-term solution to help you friend get back on their feet.
Surprise Them with Groceries
If your friend is a well-meaning person, this could be a delightful gesture. Groceries are an essential part of our monthly spending. Of course, you could also surprise them with bulk meals like a casserole or invite them over for dinner.
Host a Budgeting Party
This could be good for you, too! Get some friends and family together to create a budgeting plan with unique short-term or long-term goals. Best of all–hold each other accountable. Start a group chat, or get together once a week to talk about your successes and failures. Make sure you’re keeping the conversations positive and supportive, and be open to receiving feedback about your own financial planning.
Bad Habit #4: Not Strategizing Your Debt
Debt isn’t inherently bad. In fact, there are plenty of ways to make debt work in your favor. You could get a mortgage, invest in your education for a better career, or buy things that save you time and money.
The trick is: you should have a plan to profit off your debt. After all, the lender certainly will be. Make sure that your loan has a purpose in your life and isn’t just a “situation bandaid.” And hold yourself accountable to a good payoff strategy 🎯 Interest rates add up FAST, and you’ll thank yourself for out-smarting the system.
Bad Habit #5: Not Working With a Financial Planner 😉
At The Resource Center, we’re here to help you on your financial journey. We create personalized financial plans with strategies to help optimize your assets and reduce risk–all while keeping your lifestyle intact.
One of our biggest priorities is helping you feel confident and knowledgeable. With our financial planning services, The Resource Center will help develop a plan that diversifies your assets, stays consistent with your level of risk tolerance, and provides a stress-free environment to turn to when you need help.
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Investment advisory products and services made available through AE Wealth Management, LLC (AEWM), a Registered Investment Advisor. The information and opinions contained herein provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by The Resource Center Insurance Services, LLC. Any media logos and/or trademarks contained herein are the property of their respective owners and no endorsement by those owners of The Resource Center Insurance Services, LLC is stated or implied. 1806373 – 05/23