5 Bad Money Habits to Break
- Financial Education
- Frontwave Credit Union
Here are 5 common bad money habits, along with tips for swapping them out for good habits that will help get your finances on track:
1. Using Credit Cards to Live Beyond Your MeansCredit cards are a great way to build credit and help you reach financial goals. But they can also put you in debt if you’re not careful. It’s easy to overspend with a credit card because you don’t see the money slip away until you get the bill each month.
If you’re guilty of overusing your credit cards to finance purchases you really can’t afford, try using cash or your debit card instead for a few weeks. Be sure to look at your checking account balance every day. You’ll quickly learn to stop and think twice before making a purchase.
Also, if you can’t pay off your credit card balance each month, then at least pay more than the minimum payment. Remember, even if you stop using the card, the interest charges will still compound, increasing your total debt. Paying more than the minimum will reduce the number of months (or years) it will take to pay off that debt – and the amount of interest you pay.
Life is full of surprises. Most people can’t predict when their job may be downsized or their car needs a major repair. That’s why it’s important to build an emergency saving account that has enough to cover at least three to six months of expenses.
2. Not Saving for an Emergency Fund
If you haven’t set aside money for emergencies, you may be forced to use a high-interest credit card to finance these expenses. But relying on a credit card will only keep you in a cycle of debt. Planning for the unexpected is a critical step to becoming financially free and avoiding taking on debt to finance the surprise expenses we all have pop up in our lives.
We live in a world where time is money. You can make your life easier with the click of a button, and when you’re pressed for time, it can be hard to pass up paying for convenience. But having groceries delivered, getting takeout, dining out, using out-of-network ATMs, and making regular trips to your favorite coffee shop all add up.
3. Spending for Convenience
While these costs may not seem like they could move the needle too much in your overall financial outlook, the truth is, paying for convenience is more expensive than most people think. But it’s an easy habit to break with a little planning. To get a handle on your convenience spending, track how much you actually spend on these items each month. Then, consider if the cost of convenience is really worth it for you. If it adds up to more than you intended to spend, cut back and put that money toward some long-term financial goals.
Saving for retirement may not be as fun as taking a vacation or frequent nights out on the town. But it’s probably the only way you’ll realize your dreams of a relaxing retirement when the time comes. Most Americans are in charge of financing their own retirements, which makes it even more critical to contribute something to your nest egg as early and as often as you can.
4. Not Financing Your Retirement
If you’re not already setting aside money for retirement, check with your employer to see what retirement benefits it offers. If your employer offers a matching contribution, be sure to max it out. That matching contribution instantly adds to the money you’re putting into your nest egg. Not taking advantage of retirement plans through your employer will likely leave free money on the table or at the very least, make the road to retirement more challenging later on.
5. Ignoring Your DebtIf you carry credit card, student loan or other debt, it can be overwhelming to figure out just how you’ll find your way out. But ignoring the debt you have won’t make it go away. Even worse, not managing it can negatively impact your credit score and hold you back financially.
The first step to getting out of debt is getting organized! Start by familiarizing yourself with who holds your debt, how much you owe collectively and how much you need to contribute monthly to start paying down your debt. If you don’t already have one, set up a budget to help you identify a clear path to manage your day-to-day finances and become debt free.
Just as creating bad habits took time to form, it’ll take time to break them and form new, healthy habits. The peace of mind a healthy financial status brings is priceless and if you need help getting your finances in shape, the Frontwave crew is here to help. Give us a buzz at 800.736.4500 or swing by a local branch for a free financial checkup!