Many bad financial habits make people go further and further into debts or simply to a stagnant state where nothing is worse but nothing is better either.
Here are the top 10 bad financial habits and their alternative solutions. You may want to check if you’re doing one or any of the bad habits because if you are, it’s time to change and take control of your financial health.
1. Always Pay Bills Late
Recurring bills like credit cards, phones, electricity, gas, water, internet, need to be paid on time. Otherwise, not only risking getting their services suspended, but you also risk paying late fees and interest unnecessarily.
Humans forget. We’re all prone to forgetfulness. For that, there are several tools to help you remember to you pay bills on time
- Calendars, like Google Calendar, that can send you not only a pop-up notification but also an email reminder when a bill is due.
- Digital Alarms, like the one that usually comes with your device.
- Spreadsheets, like Google Sheets, detailing all recurring bills, and review it every week to decide which one needs to be paid that week. Pick a day to review and build this new habit.
2. Maxing Your Credit Cards or Any Available Loans
Maxing your credit cards or any available loans is never a good idea unless you’re sure you can pay the total balance in full when the first statement arrives. Otherwise, you’re going to pay a lot of interest charges which is not only a waste of money but also a strain on your other needs or potential investment opportunities.
Therefore, use a credit card only if you can pay the total balance. Otherwise, don’t use any credit card.
You must also stay away from any loans unless you really can’t avoid it, like student loans for example. Here is a post about How to Get Out of Debts.
3. Only Pay the Minimum Amount of Your Credit Card Balance/Other Debts
If you only pay the minimum amount, instead of the total amount of the debts, you’re going to pay a lot of interest for a longer period of time.
For example, say your total credit card balance is $1500, and your credit card interest rate is 19%.
If you pay the minimum amount of $31 for example, the minimum repayments you’d pay is $4,620 over 15 years and 10 months.
If you pay a bit more, say $74, you’d pay $1,786 over 2 years.
But if you pay a total $1500 all at once when the first statement arrives, if your credit card comes with an interest-free period, you’d pay no interest, just $1500.
For further details on how to calculate interest charges, head to Credit Card Calculator or How Is Credit Card Interest Calculated and Charged.
4. Paying for Subscription
Whatever subscription you are paying right now, review it. Many people pay for Magazines, News, TV, even Radio. But many don’t realise they could always get similar products for free.
Unless you’re subscribing for a service/product that is needed to enhance your professional life, chances are you don’t really ‘need’ them. In other words, if you stop using them, you still can live your life with free alternatives.
Magazines can easily be found free on the internet. Some public libraries give free access to their members (which are also free) to borrow the latest popular magazines.
News, no doubt, is also freely accessible on the internet.
Alternatives to free TV are abundant. Nowadays, there are many apps that offer catch up sessions for your favourite free TV to free you from the tyranny of TV schedules. And don’t forget YouTube, where you can watch not only news but also movies and tutorials for free.
Radio is everywhere and paying for something you can get for free, really, is silly. True that some apps offer unlimited skips, free from ads, and the ability to download songs. But if you think again, do you want to waste money on that ‘small’ convenience?
5. Money-is-Happiness Mentality
When faced with boredom, many people turn to buy junk food, online shopping, gambling, or even worse, buying alcohol, cigarettes, and drugs instead of working out how they can improve their mental state without unhealthy distractions.
Here is a book showing you how to get rid of your addiction, any addictions, as all addictions follow the same pattern: Addiction Crash Course In One Sitting: Liberate Yourself From Addictions!
6. Not Having Any Budget
Many people don’t have any budget. When asked why, they’d usually say they know they spend their money carefully. The word ‘carefully’ may mean different things to different people.
Some people define ‘carefully’ as ‘not too often’, but they may fail to distinguish between wants and needs.
Some others define ‘carefully’ as ‘not too much’, but they may end up buying hundreds of useless two-dollar items.
These people often end up living paycheck to paycheck with no proper financial planning for any savings and investments.
7. Not Sticking to Budget
Unlike the money-is-happiness mentality, not sticking to budget is usually caused by a lack of self-discipline.
Impulse buying is one of the most common reasons why people don’t stick to their budget.
They often confuse ‘want’ and ‘need’ easily while also having a frugal mentality, thinking that what they’re buying now can save them a lot of money in the future.
An easy example would be purchasing an electronic device just because they’re on sale, not because they’re needed. Here is How to Tell the Difference Between Your Wants and Needs.
8. Buying Meals Instead of Making Them
This one is different from ‘Not Sticking to Budget’ mentioned above because anyone can always budget takeaway meals and stick with it.
It’s easy to justify our purchase of meals and coffee by saying we’re always busy and we should not spend much time making things we can buy because “time is money”.
But if you pay closer attention, you can always prepare your meals and coffee in under 10 minutes.
Of course, planning your meals is preferable, but if you’re just too busy, here are some ideas for quick healthy recipes.
9. Not Looking for a Better Deal
We have many options when it comes to choosing which company provides the best deals, such as insurance, gas, electricity, internet, and cell phone deals.
For example, with electricity, I’ve saved at least $25 per month, which easily adds up to $300 a year since I switched to the best (cheap and good) provider.
10. Focusing Too Much on the Price
This is the trickiest part of all since frugal people experience this too often: they focus too much on the price of an item and forgetting the other factors like time and energy spent to obtain that particular item.
For example, grocery shopping at a certain supermarket located 20 minutes further than the other, more expensive supermarket. Unless you shop in bulk for at least for a one-month supply, going further, spending fuel and time to a cheaper supermarket is not worth it.
How to Quit a Bad Habit
Quitting a bad habit is easier said than done, but it’s not as hard as most people think.
The first thing to do is to know why you want to quit a bad habit.
Next, you need to know how bad habit is formed so that you know how to replace them with a good one. This blog explains it well.
Conclusion
To take control of your financial health, you’ll need self-discipline by not only identifying the bad habits you may be having but also replacing the bad habits with the good ones.
