How to break seven common bad money habits

Time and time over, it has been established that how one spends money is basically tied to certain habits. For instance, someone who is ostentatious is bound to spend more. Rising above economic recession starts with adopting smart habits. Certain habits go a long way in determining how badly, or well, one manages one’s money.

Financial expert and content marketing writer, Nancy Mann Jackson, argues that bad money habits can be exceptionally hard to break, whether they’re ingrained from one’s upbringing or stem from a lack of knowledge about personal finance. Continuing, she argued that “even when you have the best intentions and a strong financial plan, those enduring rituals will continually derail your money success.

For instance, if you’re trying to get out of debt but constantly feel the need to splurge on expensive dinners out to keep up with your friends, it’s unlikely you’ll reach your goal.” Financial analyst with Forbes, Michael F. Kay, while commenting on investment and fixing bad money habits, stated that considering one’s system for managing money is key to incremental financial success.

Below are some bad money habits identified which, eventually undermine one’s financial wellbeing.

Habit #1 Shopping for entertainment

There are people with obsessive shopping habits. They see shopping as entertainment, finding pleasure in it. Shopping for entertainment has grave consequences on one’s budget and eventually affects one’s financial security.

Cure: Ensure that you stay out of shopping malls and avoid online shopping sites; find other ways to engage yourself productively and realign your idea of productive fun.

Habit#2: Spending more than your income/salary

Going beyond what you earn as salary or regular income is one of the worst money habits that hurt your financial health. This has been a constant habit that has ruined many people. Overspending simply implies spending beyond your income.

Sarah Schmalbruch, Business Insider of the Financial Post, argues that “moderation is key here. There’s no problem with doing these things when you can afford them, but if you find yourself doing them all the time and feeling a little tight in the wallet, it might be time to find some alternatives.”

Cure: You must distinguish between your wants and needs. Wants are usually not pressing. They are things that you can do without. But your needs are absolutes. When you are able to do this monthly, it helps you to control your finance.

But if on the other hand you have to spend more than what you earn, then you must increase your income.

Habit#3:  Impulsive expenditure

It has been established that impulsive spending is emotional purchase. Many people are guilty of this. They buy things because the product catches their fancy.

Cure: Think through before you make any purchase. Constantly differentiate between what is essential and what is merely luxurious and unneeded.

Habit#4: Spending before saving

This is ruinous. It is wrong to only save what is left after you might have carried out all your purchases. The usual instinct is to quickly buy all that you need the moment your salary/income comes in.

Cure: You must have a certain percentage that must first be deducted as savings immediately your salary/income comes in. That must have been kept aside before you begin spending. This must be constant. You build your budget on whatever is left after you must have deducted your savings.

Habit#5: Excessive indulgence in habits that are financially strenuous

There are certain habits that strain your earnings. When drinking, smoking or gambling become uncontrollable, they strain your income/salary. You may not immediately recognise this as a waste but it drains your finance and puts you under pressure. These habits in themselves could have far reaching negative impacts on your health.

Cure: There is absolutely nothing more damaging than indulgence in habits that threaten your health. These habits must be stopped and you must ensure that you engage in practices or routines that develop your overall wellbeing.

Habit#6: Believing that more cash would bring more financial freedom

It is a general assumption but it is not true. More cash does not necessarily translate into financial freedom or happiness. If you have awful money habits, you may be earning more but be in constant debts.

Cure: You must be very prudent with whatever your earnings are. Financial prudence is needed no matter the amount of money that you earn. It is not the amount but the judiciousness that you introduce.

Habit#7: Late payment of bills

Undue postponements of payments of electricity bills, children’s school fees, house rents and loans among other essential bills could place pressure on you. When you delay the payment of bills without tangible reasons, you increase your expenses immensely. In very many cases, it has been observed that late payments attract huge interests or late payment charges.

Cure: Ensure to pay your bills as at when due. You can set up auto debits of your accounts at specific dates. When you do this, it takes the stress off your neck.

Nimi Akinkugbe, CEO of Bestman Games, a personal finance professional and author of the book, A-Z of Personal Finance, states that “it is possible to turn your financial life around. Your attitude to your debt problems can hinder your financial recovery. With interest, late payment penalty charges and the attendant fees and charges, you will find that almost all your money goes towards debt service.”