By Emma Worden
When faced with a financial shortage, you’re either not earning enough or spending too much. While there are several ways to solve the first problem, the latter is far more vital. At the end of the day, it doesn’t matter how much you’re earning if you have all those bad financial habits to hold you back. In other words, in order to solve your problems, you need to embrace that good old cliché statement that every real change comes from within. With that in mind, here are 7 bad financial habits you need to break as soon as possible.
1. Not having a monthly budget
The first major mistake is trying to wing your monthly expenses, seeing as how this doesn’t necessarily have to work in your favor. Regardless of the industry, it’s always possible to predict your monthly net income (with more or less accuracy). Based on this, you need to make sure you can handle all your expenses. First of all, you need to set all the major outcomes like the utility bill, credit payments and the overall cost of day-to-day expenses. Then, if you have a savings plan, you might want to make an optimal number that you will be able to deposit in it. Sure, things don’t always go as planned – but just by having a plan, you’ll get two steps ahead.
2. Ignoring payment deadlines
Another thing you need to keep in mind is the fact that payment deadlines are there for a reason and nothing good can come from ignoring them. Still, some deadlines are more important than others. For instance, by failing to deliver on a due date, you might become susceptible to all sorts of fines and penalties. Aside from this, you will also lower your credit rating, which means that you’ll have a much harder job getting approved for a loan when you need it. The best way to handle this is to pay your bills as soon as they arrive.
3. No savings account
When an unexpected event takes place, you can either pay for it from your savings account or have to find a way to settle a financial problem that happened due to it. At the very least you need to have an emergency account. In most cases, you should allocate at least enough resources to cover three months of your expenses with it. For instance, if the cost of rent and utilities on a monthly basis amounts to $2,000, you need to have at least $6,000 in your savings account. Of course, at your own behest, you can increase this amount.
4. Not keeping your business and your personal assets separate
The reason why so many small companies decide to register as LLC instead of structuring as a sole proprietorship is to protect their private assets in the case of a failure. Unfortunately, some entrepreneurs decide to ignore this warning and instead invest their personal assets in order to keep their company afloat. For these purposes, they take money from their emergency account and even out of their 401K, which is always a bad idea. To avoid doing this, it is better to apply for small business loans in your moments of need, than to compromise your own future.
5. Impulse buying
The next reason why people experience financial difficulties is the fact that they buy things they don’t really need, with the money that they don’t have. Therefore, you need to resist the urge of impulse buying as best as you can. The simplest way to pull this off is to compose a list of items you need, check their prices online and let this list rest on the table until tomorrow morning. Next day, if you still feel like this is a good choice, you should definitely buy the item. As for the discounts and limited time offers, this too is something you can check online.
6. Ignoring price tags when grocery shopping
When grocery shopping, you probably have your own ideas about the cost of certain items, however, when buying in bulk, mistaking the price of a single item you buy by just $1 can make a huge difference at the counter. Because of this, all you have to do in order to ensure more consistency in your shopping efforts is start paying more attention to price tags when grocery shopping. Nowadays, with the plethora of grocery-shopping apps out there, this trend becomes even easier.
7. Over-using your credit card
Finally, while the money on your credit card may have the same value as the cash you have in your wallet, the thing is that the latter is much easier to keep track of. Set a budget, and use cash for purchases. As the number of bills in your wallet decreases, it becomes lighter and visually emptier which causes you to become more careful what you spend your money on. As for your credit cards, unless you’re using your phone to track its balance, it’s quite easy to lose track of these calculations and end up spending more than you planned for.
At the end of the day, these changes aren’t merely ways for you to save a bit more cash in the long term; they are steps that will lead you towards the goal of becoming more responsible with your finances. In other words, they will improve your financial status regardless of your income.
We hope these 7 bad financial habits will be a thing of your past. Comment below and tell us which habit you are working on changing!
Emma Worden is a business manager from Sydney. She enjoys reading and writing about business and giving advice and tips through her texts. If you want to read more of her work, visit BizzMarkBlog.com