Bad Financial Habits To Avoid
One of the most important responsibilities you will have in this life is being wise financially. Money can be our best friend, but our worst enemy if you do not know how to handle it. Look no further than the entire country of America, who is estimated to have federal government debt of $22.7 trillion dollars by the end of this year. This is all due to unwise financial decisions made by individual people. If you want to live a more prosperous life, you can start by being smarter with your finances. here are some bad financial habits that you must avoid at all costs.
Overspending on Credit Cards
Many people are under the impression that credit cards are just a way for you to use the money to spend it on whatever you like. This is an easy habit to fall into, but the reality is that everything that you spend on that card must be paid back eventually. It just doesn’t have to be immediately. It can be tempting to spend money on many items you do not need on a credit card, especially if you qualify for a high credit limit. However, this is the last thing you want to do.
The more you spend and the more late payments that you make, it can leave your credit score damaged and interest rates will leave you having to pay off more than you originally spent. If you have a credit card, use it for only things that you need and what you know you can pay back. One general rule of thumb is to never spend more than a third of your credit limit on your credit card a month. The key here is to ensure you make responsible, timely payments and not spend more than what you need.
Failing To Budget
Failing to have a budget will lead you to an inevitable financial collapse. You need to have a good understanding of what you are bringing in and what you have to sacrifice each month. Consider all of your bills, loans, and essentials. Spending money aimlessly when they should be going to other places will cause you to be unorganized and worse off. One of the primary reasons why having a budget is unpopular is due to the amount of effort that has to go into calculating costs. Many are not willing to sit down and fully analyze how much they owe and how much they make. However, this should no longer be an excuse as there are many apps and software that can help expedite the process.
The last thing you want to do is recklessly throw away $500 on that new flat screen TV when next month’s rent is due. So be sure to calculate all of your expenses so that you will be adequately prepared for finances you need to take care of.
The concept of saving was embedded in our brains from the time when we had piggy banks as children. However, in today’s world, people continue to spend without having any reserves. If you struggle with saving and have the compulsive nature to always spend, you should address that issue. Starting an emergency fund may be the best course of action.
You should always ready yourself for the unpredictable, whether it is getting laid off, a natural disaster or something that you may consider unforeseen. It could be as little as one dollar a day, or you could be more aggressive if it fits into your budget. The point is that you want to have a safety net in a worst-case scenario.
Only Paying Minimum Payments On Debt
This ties into some of the other bad financial habits you want to avoid. When taking out a sizable loan, a healthy amount of interest will be attached to that. However, too many people are content with making the lowest, minimum payment, either due to a lack of planning or a lack of adequate finances. You should not take out a loan for an item that you cannot adequately pay back. If you want to pay off debt quickly, you will need to make more than minimum payments. If you settle for making minimum or income-based payments, your debt will follow you around like a shadow for an extended period of time.
If you feel comfortable about it, you can choose to automate the payments so that funds come out of your account automatically. You can also consider consolidating the debt to a lower rate so that your payments will have more punch when it comes to knocking off the debt. However, you are not giving yourself more time to pay off everything you owe by paying the smallest amount possible each month. All you are doing is extending the life of the loan. Pay as much of the loan as possible so you are not paying it back 10 years into the future.
Living Beyond Your Means
There is no doubt that many want to live a lavish life, and it certainly has its benefits. At the same token, everything has a price, and unfortunately, not everyone can afford the heavy cost of luxury. As posted here, you will find it hard to afford caviar if you are bringing in an income that can only afford you beans and rice.
The most important thing you can do for the sake of your financial future is to ask yourself what you can afford. Do you see how having a great budget ties into everything? Adequately plan ahead and ensure that everything from your car, to your medical bills and means of living, can be paid for.
These are just a few habits that you should for the sake of your financial future. Avoid these habits, become responsible, and you will your life become much less of a hassle in the long-term.