Developing good habits helps us focus on things that need our attention most.
But as you work to get your financial life on track, you’ll probably find old, counterproductive habits undermining progress. Some of them worked once, but now they’re holding you back. Others have always been bad.
Dropping bad money habits makes it easier to power up your financial life. Following are some bad money habits, and tips for ending them.
1. Carrying a credit card balance
Carrying a balance on a credit card is like walking down the street with a hole in your wallet and letting money leak out.
Here’s why: Suppose you are paying down a $5,000 balance on a card charging 15% interest. If you only pay the minimum amount each month, it’ll take decades to pay off the debt and cost you thousands of dollars in interest.
Build a better habit: Devote every spare penny to getting rid of credit card debt. If you have other pressing debts, make a plan for dealing with all of them. For more tips, check out “Resolutions 2020: Crush Your Debt in 3 Simple Steps.”
Keep the balance from building again by making a new habit of paying off the entire bill every month — no exceptions ever.
2. Failing to fund a retirement plan
There are compelling excuses for putting off saving for retirement. But none of those excuses will matter if you reach retirement age with little saved. And, if you don’t take advantage of your employer’s matching contributions, you’re passing up free money every month.
Build a better habit: Start paying close attention to your retirement savings. If you can’t significantly increase the monthly contribution you make to your plan immediately, increase it by 1% a month. Once a year, check the performance of your investments and rebalance your portfolio.
3. Not shopping for monthly services
Hopefully, you comparison shopped before signing up for insurance policies. And we trust you did the same thing with phone, internet and cable services.
But you might be missing savings if you’re not checking prices again every year.
Build a better habit: Put some energy into improving your financial life. Once a year, spend 30 to 60 minutes price shopping for monthly services. To make it easy, keep a list with each company’s name, your account number and your monthly payment amount.
4. Paying for cable or a landline phone
Cable prices are going nowhere but up. Free and cheaper alternatives make experimenting worthwhile. But will you get out of your rut and try something new?
Build a better habit: Before trying a change, record your viewing habits for a week or two to see how and if you’re using the services you currently have. If streaming seems like a legitimate option for you, check out “4 Streaming TV Services That Cost $20 a Month — or Less.”
Ditto for your landline. If you’re able, drop the landline and use mobile phones only. If that seems too radical, refrain from using the service for one month — or even just a week — while you check out alternatives.
5. Ignoring coupons and deal sites
If you aren’t using coupons and checking daily deal sites, you’re spending too much. However, you still need to exercise discipline when bargain shopping so you don’t sabotage good intentions with impulse buys.
Build a better habit: Tackle bad habits in small bites. Try just one deal or coupon site. Money Talks News’ deals page, for example, has new sales and coupons every day relating to clothes, shoes, electronics, tools and more.
6. Playing investing too safe
Safe investing is important. But there’s safe, and then there’s too safe. Keeping all your money in no-risk accounts means inflation will rob you of spending power slowly but surely.
Build a new habit: Don’t break all your bad habits at once. Pick one and focus. For instance, make managing your investments a priority. Money Talks News founder Stacy Johnson offers some tips for getting started in “Ask Stacy — How Do I Invest in a Mutual Fund?”
7. Getting hooked on lattes
That $4 latte is killing your budget. One such latte a day each workday adds up to $20 a week — potentially $1,040 a year. If you tip a dollar each time, you’re spending $1,300 a year. There’s surely something you would rather do with that $1,000.
Build a better habit: Substitute new habits you enjoy for the old ones. A latte is a way of treating yourself, so find treats that don’t bust your budget.
8. Living without an emergency fund
If you don’t have an emergency fund, your life is a high-wire act with no safety net. Emergencies are inevitable. Life is full of them.
Build a better habit: Make a commitment to change. Write down your pledge and put it where you’ll see it. This will allow it to reinforce your resolve.
Commit and watch your savings build. If necessary, take on a few hours of extra work each week, whether it’s overtime at work or watching a neighbor’s dogs. For more tips, check out “9 Ways to Build an Emergency Fund From Scratch.”
9. Buying retail
Paying retail markup is like setting a match to a pile of cash. Smart buyers find ways to avoid doing that.
For example, a new car’s value drops fast the minute you drive it off the dealer’s lot. So, buy one that’s gently used instead.
Build a better habit: If you feel pressured to keep up with your friends or neighbors, ask yourself what that’s costing you. Stay out of malls and brand-name stores except when researching products. Read up on prices online so you know a good price when you see it.
And check out this post: “43 Things You Should Never Buy.”
10. Using shopping as entertainment
Perhaps you know people with compulsive shopping habits. Maybe you are one of them. Spending creates a high that’s addictive, severely damaging your budget and the financial security of your family.
Build a better habit: Try a spending fast. Remove your name from catalog lists, stay out of stores and hang out with friends whose idea of fun doesn’t include shopping.
Check out “11 Tips and Tricks That Will Keep You From Overspending,” for more tips.
Do you have tips for breaking bad money habits? Share them in comments below or on our Facebook page
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