11 Bad Habits When It Comes to Managing Money
We’ve shared some of the good financial habits you can have to curb your spending and grow your savings. But what about bad habits? Do you have any that you’re aware of (or not aware of)? My colleagues, who work with credit union members every day, shared some of the habits they see that literally have a negative effect on your finances.
1. LIVING BEYOND YOUR MEANS.
This seems fairly obvious, but many people carry credit card debt or take out loans to pay for vacations or holiday gifts. Sometimes it’s necessary, if you have a sudden loss of income or unexpected expense (but then that’s what your emergency fund is for!). But unless it’s absolutely necessary, you want to limit your spending so you can pay your bills in full each month. It’s no fun living paycheck to paycheck!
2. RELYING ON MONEY THAT HASN’T COME IN YET.
You know the saying, “Don’t count your chickens before they hatch”? Bingo. Maybe you’re waiting on a friend to pay you back, or your tax return to come in, or payday is next week. What if your friend isn’t good for it? What if your tax return isn’t as much as you thought, or worse, you miscalculated and end up owing taxes? What if direct deposit isn’t working and your paycheck is delayed (trust me, your bills won’t be)? Until the money is actually yours, in your account, don’t spend it.
3. TRUSTING THE BALANCE ON YOUR STATEMENT.
Sometimes, the balance on your statement is misleading. For example, your statement doesn’t account for checks you’ve written but the person hasn’t cashed. It’s still technically in your account, but you’ve already earmarked it for someone or something else. If you accidentally use those funds and they cash the check, suddenly you’ve overdrawn your account, which leads us to the next bad habit…
4. INCURRING FEES.
There are a variety of fees you can avoid with a little planning. Don’t withdraw funds or make a payment without checking your account balance (don’t forget any outstanding checks!). Don’t run out of cash and find yourself needing to use one of those pharmacy, gas station, or bodega ATMs that always have a withdrawal fee. Most of all, don’t be late paying your bills.
5. PAYING YOUR CREDIT CARD BILL LATE.
You especially don’t want to be late on your credit card payments. Why? It’s a double whammy. Not only will you get hit with a late fee, but if you make it a habit, it can also ding your credit score. That has much larger ramifications than a one-time fee, including your ability to get a loan, apply for other credit cards, and other lines of credit. And that’s just one of the mistakes you can make with credit cards.
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6. BEATING YOURSELF UP FOR BREAKING YOUR BUDGET.
We’re all human (unless you have something to tell me…). At some point, you’re going to go over budget, relapse into one of these bad habits, or miss a good financial habit you’re trying to stick with. You may want to give yourself a mental kick in the rear, but what good does that do? We all make mistakes. Learn from yours. Ask yourself what you could have done to avoid the mistake, or how you can make up for it in next month’s budget.
7. BUYING ON A WHIM.
Window shopping is fun! Until you get home and wonder why you impulse bought that knickknack that you definitely don’t need. Making impulsive purchases can feel exciting and empowering in the moment—I’ve earned this money, and I’ll spend it how I want! But later come the feelings of regret—I didn’t need this, but I sure could have put that money towards something much more worthwhile.
8. SAVING FOR THE SAKE OF SAVING.
On the flip side, it’s not a good habit to horde money like Smaug the Dragon sitting on his treasure. At the end of the day, you can’t take your savings with you. Money is a means, not an end. So, what is it for? Early retirement? Backpacking Europe? Buying your dream home? Fund your children’s college education? Weatherizing or remodeling? Leaving behind a large charitable donation? Anything is valid, but don’t save just because you feel like you’re supposed to. Make it count for something! I say this from personal experience.
9. TIPPING POORLY.
Perhaps this is more of a personal philosophy than a poor financial habit. But if you are financially secure, I encourage you to spread the wealth. Leaving a little extra for your morning coffee or good service at a restaurant probably doesn’t put much of a dent in your budget, but it does make a big difference for your barista or waiter. Plus, it feels good!
10. NOT READING THE FINE PRINT.
It’s small, but the fine print should always go under a magnifying glass, so to speak. Companies like to bury technicalities that can trip you up and cost you money in the end. For example, a credit card with a tantalizing 0% interest might have a yearly fee or become a really high interest rate after one year. The same goes for other financial decisions like signing a lease on an apartment, buying a car, getting a mortgage, or how your investment advisor earns commissions.
11. IGNORING THE PSYCHOLOGY OF MONEY.
Money isn’t just about dollars and cents, spreadsheets, or budgeting apps. Our relationship with money plays a huge role in managing our finances. If you recognize how you think and feel about money, you have a better chance of establishing healthy financial habits.
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