Sunday, July 21, 2024

5 Money-Spending Habits That Can Harm Your Finances

Financial security is highly imperative for everyone. If you are not secure financially, it can lead to problems and being in debt. One of the reasons why people are financially unstable is their bad financial habits. The money-spending or using habits that we have can sometimes be the cause of destruction and pain in our lives.

If you are not careful about these bad habits regarding money, you can pay a lot more in taxes than needed. You can empty your entire savings to pay a debt, leaving you with no cash to use in emergencies.

However, like every bad habit, you can break the bad financial habits you have too. To do that, first, you need to know what money spending habits are harming your finances. In this blog, we will learn about them and how to break them.

  1. Spending money unwisely

Do you know that every day, most people spend around $50 on unnecessary things? From happy hours to unlimited coffee, they spend money on things that can create chaos in their budget. If you calculate this amount, it becomes $180000, which is a massive amount.

It reduces your cash flow, which you could have used to pay debts or invest in stocks or more.

To break this habit:

Use cash or debit cards to buy things, preferably former. No credit card as you can buy numerous things using credit cards without paying any attention to the consequences. When you use cash, you know that you have a limited supply and thus will curb unnecessary spending.

Manage subscription: Do you need a subscription to every TV streaming app or channel? No! You don’t! Thus, review that and manage your subscriptions.

Cook and brew coffee at home: Takeouts can put a dent in your budget. So does getting coffee from a cafe every day. Thus, start cooking at home and brewing coffee at home too.

2. You do not save money.

Another bad habit is to spend all your money without saving even 10% of the total amount you have. If you do not start saving now, it can be a problem in the future.

To break this habit:

  • Pay a part of the salary or money you have to your future self. It can be 20-30%, depending upon your needs and budget. The rest of the money you have, you can use however you want, but after making a budget. It will ensure that you do not spend without any thought.
  • Also, the money you set aside for the future should be in a savings account in a bank. Banks like the great southern bank (formerly CUA) have the best interest rates, increasing the amount you save. Also, you can use a small percentage of that amount to invest in stocks or other schemes.

3. Having insurance that you do not need

Having insurance is a good thing. It can help you with many challenging situations. But the thing is, having numerous insurance policies is never a great idea. Why? Because you are paying installments for something that you do not need. That amount you will never get back, which is a waste of money.

To break this habit:

Read the fine print and think deeply before paying insurance. For instance, why pay for car insurance when you know that the said car does not have much life.

4. Not having an emergency fund.

Emergencies do not tell and come. They just come! And when that happens, you do not want to dip into your savings.

To break this habit:

  • Make an emergency fund separate from your other savings or checking account.
  • Keep adding the amount in it now and then. If you break it for any reason, make sure you replenish it properly.

5. Using credit cards frequently.

Once in a while, if you buy things on credit, it is fine. But if you make a habit of buying every big or little thing using a credit card, that can be a problem. With credit cards, you can buy numerous things and worry about paying it later.

To break this habit:

  • Try to limit using credit cards. Go for cash instead.

Hopefully, these tips will help you break free from these habits and have better finances.

Sam Allcock
Sam Allcock
Sam heads up Cheshire-based PR Fire, an online platform that has already helped over 10,000 businesses to grab widespread media coverage on their news at an extremely accessible price point.

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