We form habits in different ways and they shape our lives either for good or bad. Therefore, if you’re trying to improve your finances, you need to be deliberate about breaking bad money habits and replacing them with good ones, because bad money habits will eventually lead to tears. Here are some bad money habits you should avoid:
1. Not preparing for an emergency
Your emergency fund is, frankly, a great place to start your savings plan. We all know that unexpected things happen all the time. For instance, Covid-19 which cost a lot of people their jobs and led to salary slashes for many others. So the best way to stay financially secure is to save up for emergencies.
Not having an emergency fund means you will usually need external help or loans whenever you run into financial challenges.
2. Dipping into your savings
You can’t grow wealth if you keep dipping into your savings. Not having the discipline to save will adversely affect your plan to build wealth. Once you set up savings towards a goal, keep your hands off the savings till you achieve your goal. That way, you can focus and achieve a lot more than you imagined.
3. Saving without a goal
Oftentimes, money kept without a goal in mind is easily spent. If you want to save more, you need to have a clear goal and then set up a plan to achieve it.
Start by determining the major milestones you hope to achieve in the future, like having a home, a car, or paying for education for your kids. Next, determine how much you need to save and for how long.
4. Spending as much as you earn or spending more than you earn
If you’re spending as much as or more than you earn, this means you’re living paycheck to paycheck with no proper plan for the future. This lifestyle makes it nearly impossible to build up significant savings or wealth over the long term.
Your income might not be much right now, but spending every single penny is still considered a bad money habit. Do not spend as much as you earn on expenses or more than you earn by living an expensive lifestyle. Cut down on expenses so that you can at least have some money stored up.
5. Constantly blaming others for your mistakes
A mature person is someone who can take full responsibility for their actions. We all make mistakes, but what differentiates people who learn and people who don’t is responsibility.
You may have made bad money moves in the past or might currently be facing the consequences of one. Instead of passing the blame to someone else, take responsibility and retrace your steps.