Source : the age
Saving money and building wealth for your future doesn’t happen without a few sacrifices along the way. Small changes to your lifestyle and being mindful of your bad habits can have a big impact on how much you’ve got left over at the end of the week.
At the same time, with the constant toils of everyday life, it can be difficult to keep across everything you should be doing, and some less-productive routines can emerge. Here are 10 financial habits that can eat away at your hard-earned money and keep you poor.
Not keeping a budget is a classic way to lose track of your hard-earned.Credit: Dominic Lorrimer
1. Refusing to budget. If your money isn’t allocated to a specific task when it hits your account, you’re far more likely to spend it without having anything to show for it.
Create a budget that buckets your money, starting with essential spending such as housing, utilities, insurance, petrol and groceries, and make sure you’re leaving something to add into your emergency fund.
2. Not having an emergency fund. I’m a big fan of US money guru Dave Ramsey, who went from broke to an estimated $200 million in net worth, building his own system for wealth creation that he now shares with the world.
His first step to getting out of debt is to save $1000 for your starter emergency fund, which will keep you from getting into debt when life happens.
The next step is to pay off any debt you may have from smallest to largest, making minimum payments on everything while attacking the smallest debt with intensity.
3. Using credit cards. Racking up credit card debt or relying on buy now pay later services to fund your life is no holiday. The fact is that if you need a credit card to buy it, you probably can’t afford it.
Credit card debt is one of the worst money habits out there. With interest rates hovering around 13 per cent, it won’t take long for you to get into financial stress if you don’t pay off your balance in full every month.
4. Not shopping around. Whether it’s sneakers, a new car or a couch, you can save a lot of money by just slowing down and shopping around before you’re about to make a purchase.
For example, if you need a new laptop, don’t just march into the first shop and pay full price. Once you decide which one you’re after, shop around online and make a few calls to discount stores to see if they have one in stock.
Also, consider whether it’s close to your birthday or the end of the financial year. You may be able to get a contribution towards it as a gift, or it may be put on sale, which could save you hundreds. And if it’s for work, maybe your employer will pay for it as part of your package, so it’s worth checking.
5. Spending beyond your means. Spending on your credit card or buying items you can’t afford can put your household budget under pressure.
If you find yourself booking flights to see your friend interstate for their birthday dinner, you might need to work on your impulse control. Reckless spending can put a huge dent in your budget, so be more realistic about what you can afford and make sure you’re living within your means.
6. Mindless scrolling. Picking up your phone and scrolling through socials could put you dangerously close to spending money on unnecessary items. The algorithms know you better than you know yourself, so it’s only a matter of time before one of those ads shows you something that takes your fancy.
Endlessly scrolling on your phone may result in purchasing things you wouldn’t have otherwise.Credit: Getty Images
Streamlined payment gateways and automation of the online purchasing process means the money will have left your account quicker than you can say “oops”, so scroll with caution.
7. Convincing yourself you can’t save. There might not be much left by the time you’ve paid off your bills, but that doesn’t mean you should just spend it.
That $50 left over at the end of the week can go in your savings account, and over the course of a year will turn into $2600.
8. Holding on to things you don’t use. If you’ve got a corner of your garage full of sporting equipment your family doesn’t use any more, you’re probably sitting on a small fortune. Make your family members accountable for abandoned equipment. If those rollerblades don’t fit, move them on.
Dust items off and list them on Facebook Marketplace, clearing your home of clutter and giving you a bit of extra cash for your savings account.
9. Spending more as your salary goes up. Some relief on household budgets is around the corner in the form of interest rate cuts and tax cuts. If your salary has also increased, it can be temping to spend more.
While there’s no harm raising your standard of living or buying yourself a treat once in a while, it can quickly get out of hand if you abandon your budget. Over the course of a year, this adds up pretty quickly.
This might be time to revisit your budget so you don’t lose sight of your financial goals.
10. Not investing. It’s great to have savings in the bank, but it’s probably earning minimal interest in a transaction account.
Put your money to work by investing it. Micro-investing platforms can be a great way to force yourself to save and invest. This will have a compound effect over the years, which is the fastest way to grow real wealth outside your superannuation.
Remember, if you’re self-employed, you should be topping up your own super to match the superannuation guarantee of 11.5 per cent, which, of course, is also a form of investing.
- Advice given in this article is general in nature and not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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