Bad money habits, like all types of habits, can be hard to break, especially if you don’t know you’re committing them.
Many Americans are practicing a handful of not-so-obvious poor money habits that could be undermining their financial health, according to CNN Money.
“The easiest way to becoming a millionaire for most people besides discipline is automation, priorities and goal setting,” Cary Carbonaro, a certified financial planner and managing director at United Capital, told CNN Money.
Carbonaro and other money experts told CNN Money that avoiding these five bad money habits could substantially boost consumers’ savings:
- Failing to prioritize savings within a budget. Do you have a savings plan in place? If not, and the only money you plug into your savings account is whatever you have left at the end of the month, it’s time to set a savings target rate and prioritize your budget accordingly. “When you get your paycheck, have a certain amount that goes into a savings or investing account … you never see it,” Ted Peters, CEO of Bluestone Financial Institutions Fund, told CNN Money. To start, Peters recommends setting a 7-10 percent savings target. But don’t just set the savings rate for perpetuity. The rate should increase periodically. For example, if you get a bump in pay, your savings rate should increase to reflect that.
- Paying too much for housing. You should not be paying more than 28 percent of your gross income on housing, Carbonaro said. That percentage represents principal, interest, taxes and insurance. Allowing housing to drain too much of your budget often doesn’t leave you with enough income to sock away in savings.
- Investing too conservatively. Although getting more conservative with investments as you get older is typically a smart financial move, not taking enough risks as a younger person is to miss out on opportunities. “If you are 40 or younger, you should be 100 percent in equities,” Peters told CNN Money. If you’re older, check out “11 Pointers to Investing in Your 60s and Beyond.”
- Routinely shelling out too much for bank fees. Banking account fees shouldn’t make a big dent in your budget. But if you’re routinely getting hit with out-of-network ATM fees, overdrafts or penalties for falling below your minimum account balance, then you probably need to sit down and re-evaluate the terms of your accounts to see if you need to make some account changes or routine changes, or both. Check out “Bank Fees Are Rising – Here’s How to Escape Them.“
- Impulse shopping. America is truly a nation of impulse shoppers. But making hasty shopping decisions can affect your bottom line. “If you want to make a big purchase, wait a day, sleep on it and see if you really need it the next day,” said Carbonaro, “99 percent of the time you don’t.” Find more tips on avoiding impulse buys in “7 Ways to Stop the Shopping Habit.”
What are your bad money habits? Any tips on how to break bad habits so you can sock away more money? Share your comments below or on our Facebook page.