When it comes to managing personal finances, breaking the bad money habits is easier said than done. But when habits spiral out of control and threaten to take over your life, it’s time to take a good, hard look at your financial situation and make the decision to break your bad habits.
1. You spend a large chunk of your income on non-essentials – Stop being tempted by purchases you don’t need but you want, including new gadgets, clothing, beauty treatments or gold class movie tickets. Before you buy something, ask yourself: Do I need this or is this just an impulse buy? Track your expenses weekly and add it all up at the end – you’ll be shocked by how much you’re spending on non-essentials.
2. You don’t research cheaper options – When it comes to eating out, buying groceries and spending on entertainment, there are always cheaper alternatives out there. Don’t pick the expensive option just because it’s more convenient. Instead of splurging on a fancy dinner, consider cooking your own. Look for sales and buy home brands. Instead of going to see a film, rent a DVD.
3. You’re addicted to your credit cards – Credit card addiction is a one way road to financial ruin, particularly if you’re putting all your expenses on credit and have multiple cards. You can also spend more than you can afford if you set a high credit limit. To break this habit, cancel unnecessary credit cards (one or two is usually enough) and don’t put small amounts on credit. Look for a fee-free and interest-free card as well, which will help you save more.
4. You only make the minimum repayment on your accounts – Making only the minimum repayment on your card means you pay more in interest and you’ll take longer to pay off your balance. E.g. If your credit card balance is $500 and your interest rate is 18.5%, it will take you more than two years to pay off your entire balance if you only make the minimum payment.
5. You don’t have emergency funds – The phrase “saving for a rainy day” rings true when it comes to managing your money well. You never know when you’ll need that extra $10,000 – you might have an urgent operation, your parents may need to borrow it or you may lose your job. Start depositing a sum of money in your bank account every week and prohibit yourself from dipping into those savings – you’ll be amazed at how much you have by the end of the year.