The sad truth is that few of us are taught in our youth to manage our finances effectively; most of us don’t even know how to balance a checkbook when we reach the age of adulthood. And yet, we earn and paycheck, open accounts, take out loans, and apply for credit cards as though we have some idea of what we’re doing. Most of us don’t start out with a budget and we have only a nebulous plan for a future in which we enjoy extreme wealth (we’ll figure out the details later!). However, the formation of bad financial habits can lead you straight to the poorhouse with loads of debt, no savings for the future, and a credit score that’s in the toilet. So if you’re looking to break the cycle and ensure that your financial future is secure, here are a few bad habits you’ll want to curb.
1. Spending on credit. Everyone knows that you shouldn’t get in over your head with credit card debt, but you might not realize all of the ways that you can get drawn into needless spending (for example, with online accounts that store your info and require only a click to make purchases). Even with only one card you might have problems. Your best bet is to keep a card for emergencies but put it in your safe at home or a safe deposit box at the bank. It’s there if you really need it, but it’s hard enough to get at that you shouldn’t use it often (and certainly not for frivolous purchases).
2. Carrying lots of cash. Have you noticed that when you have cash on you it tends to burn a hole in your pocket? This is because you know you’re not going to owe anything once the money leaves your hands. Unlike a credit card charge, which shows up on the bill, you may spend money thoughtlessly simply because you can “afford it”. However, if you’re burning through cash simply because you’re carrying it, then you should be thinking about how that money could be earning for you if you were to invest it, rather than helping the kid at Starbucks pay for college.
3. Emotional spending. This is a big, bad way to get in financial trouble. Some people eat when they feel bad. Others take it out on the punching bag at the gym. But if your response to a fight with your spouse or a rough day at the office is to go shopping, you will soon find yourself in financial straits. Instead, spend some of that money on a therapist to help you deal with your avoidance issues.
4. Personal loans. It can be tempting to give out personal loans to friends and family when you have the money to do so. After all, they’d do the same for you, right? Maybe they would and maybe they wouldn’t, but before you go giving away your disposable income to every family member that wants a handout, think about when (or if) you’re going to get that money back and whether or not you can really afford to loan it out when it should be in interest-bearing accounts, working for you. Generosity is one thing, but continuing to loan money when you haven’t seen a penny come back is ill-advised.
5. Foregoing the 401K. Planning for your future starts here and if you donate to a 401K the money is pre-tax dollars that come directly out of your paycheck. You won’t even notice the money is missing, so don’t neglect this basic financial necessity.
Emma Martin writes for Coupon Croc where you can find discount codes for the best in dining and entertainment. Checkout the Thomson discount code for your travel needs.
