Do you struggle to save money?
Do you often find yourself overspending?
If so, you’re not alone – and we would like to help. Research has found that millions of British adults are worried about their spending habits, so this is a common problem. Yet despite this, it is actually fairly easy to improve your relationship with money; you just need to know which habits are negatively affecting your finances.
Here are five bad financial habits you should drop.
1. Bad Financial Habits You Should Drop: Spending On Auto-Pilot
Lots of people spend money every day on auto-pilot. This can be a serious problem, especially if you are living above your means. For instance, you may spend your hourly wage on an expensive coffee every day, or maybe you get taxis to work instead of public transport.
If you can relate to this, we suggest creating a realistic budget based on your incoming and outgoing costs. This will make it easier to identify the things you buy on auto-pilot mode.
2. Having Too Many Cards
Do you have lots of credit cards with different companies? If so, you could be harming your finances. Sure, the introductory may seem great, but frequently spending money that you don’t actually have can create a never-ending debt cycle.
So if you want to improve your finances, prioritise paying off debt and cancelling a few of your cards. This will reduce the amount of debt with interest in your life, so it will easier for you to actually save money.
3. Not Paying Bills On Time
Paying bills late is a fairly common bad financial habit, and it can have a significant effect on your finances. This is because paying bills late means that you may have to pay added costs, but that isn’t all; it will also negatively affect your credit score (which could make it difficult for you to borrow money in the future).
If you are struggling to pay your bills on time, consider hiring a virtual bookkeeper who can do it for you.
4. Not Having An Emergency Fund
Lots of people live paycheck to paycheck, but if an emergency happens (such as a broken car that needs replacing) you could find yourself in a sticky situation. For this reason, we recommend that you save a small amount of your pay check (perhaps 5% or 10%) to add to an emergency fund. This means you have a financial safety net – and if you don’t end up in an emergency situation, you can still use the money as savings!
5. Not Planning For Retirement
Planning for retirement may not seem like a big deal if you are a young adult, but in reality the sooner you start saving, the better off you will be. We suggest speaking to your employer (or your accountant if you are self-employed) to find out what you could be doing every month to save for retirement.
New habits don’t happen overnight. In fact, a recent study found that it generally takes between 18 and 254 days to establish new habits! So try to be consistent with your new habits for a few months, rather than a few weeks. This will increase the chance of the habit becoming part of your monthly routine (which will significantly improve your finances over time).