There has probably been at least one point in everyone’s life when they have engaged in a bad money habit. However, it’s best to realize your bad money habit now rather than later!
I believe it’s much better to realize your problem as soon as you can so that you can take action towards changing for the better. Doing so can help you improve your financial situation for years to come.
Understanding your bad money habits and making a change can help you stop living paycheck to paycheck, eliminate debt, pursue your passion, save for your goals, reach retirement, and more.
Here are several bad money habits that may be making you broke.
Keeping up with the Joneses – what a bad money habit!
I’m sure almost everyone, at one point in their life, has felt the need to keep up with the Joneses.
Whether you are five years old and want that new toy everyone is playing with, or if you are 40 years old and are feeling the need to upgrade your house, car, etc., everyone has experienced it.
The problem with this is that keeping up with the Joneses can make you broke.
VERY broke.
When trying to keep up with the Joneses, you might spend money you do not have. You might put expenses on credit cards to (in a pretend world) “afford” things. You might buy things that you do not care about. The problems can go on and on.
This can lead to a significant amount of debt.
Keeping up with the Joneses is not worth it because:
- You will never be happy, no matter how much money you spend.
- You will constantly compare yourself to EVERYONE.
- You will go into debt because that’s the only way you feel like you can keep up.
- You will have a loan payment for everything because that’s the only way you can “afford” everything.
- You won’t have any money leftover for retirement, an emergency fund, etc. because you’re spending it all on things you do not need.
Instead, you should figure out why you want to keep up with the Joneses, think about your own life and your own goals, realize that jealousy won’t get you anywhere, and try your best to live within your means.
Related:
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Letting your emotions take control of your spending.
Emotional spending is a bad money habit that many people take part in. It’s one you should stop, because it doesn’t cure any problems.
According to NerdWallet, the average US household (who has debt) has an average credit card debt of $15,611, and I’m sure some of that is due to emotional spending.
Emotional spending occurs for many different reasons. You may have had a bad day at work, a fight with your loved one, and so on. You might even be spending because you are so stressed out about the amount of spending you have done.
To end your emotion spending habit, I recommend:
- Figuring out the amount of debt you have. You’ll most likely be shocked, and hopefully this will persuade you to change your spending habits and the way you deal with stress.
- Understanding why you spend when you’re stressed. In order to stop stress spending, you need to really think about why you have this problem. Without understanding your problem, you might just keep falling into the same cycle over and over again.
- Thinking about your financial goals, so that you can stay motivated.
- Finding different ways to deal with stress.
- Sticking to a budget.
Not facing your debt.
Too many people never face their debt and don’t even know how much debt they have.
By not thinking about your total debt figure, it may seem less real and a way to run away from it. However, that will catch up to you in many ways, such as high interest charges, a bad credit score, numerous phone calls from debt collectors, possible paycheck garnishments, and more.
The first step to paying off your debt is to face it. You should add up your total debt, learn more about the debt you have, and create a plan to eliminate it.
Ignoring the importance of financial education.
Many people do not fully understand how credit cards work, how to improve their credit score, and more. However, if more people were educated on financial issues, this could lead to less debt, better managed budgets, and more.
I recommend diving into a good personal finance book, bookmarking your favorite financial blogs, staying up-to-date on the latest things going on in personal finance, and more.
Thinking you don’t need a budget.
Too many people go without a budget, because they believe they don’t need one. Sadly, many people believe that budgets are only for “poor” people, people who are horrible with money, and so on.
But, that just isn’t the case, at all. Nearly everyone needs some form of budget, even if that means just comparing your income and your expenses each month.
Budgets are great, because they keep you mindful of your income and expenses. With a budget, you will know exactly how much you can spend in a category each month, how much you have to work with, what spending areas need to be evaluated, among other things.
Budgets have helped people reach their goals, pay off debt, make more money, retire, and more.
Believing you’re invincible.
While I always try to stay positive and am a firm believer in the power of positive thinking, I do believe that everyone should have an emergency fund. However, many people have no emergency fund whatsoever, and this is a bad money habit.
There are many reasons to have an emergency fund:
- An emergency fund can help you if you lose your job. No matter how stable you think your job is, there is always a chance that something could happen.
- An emergency fund is wise if you do not have great health insurance or have a large annual deductible.
- An emergency fund is a good idea if you have a car and need repairs.
- An emergency fund is a need if you own a home. One of the lucky things that homeowners often get to deal with is an unexpected home repair. Having an emergency fund can help you if your basement floods, if a hole forms in your roof, and more.
Emergency funds are always good to have, because they give you peace of mind when something costly happens in your life. Instead of building onto your stress, you will know you can still afford to pay your bills and worry about more important things.
Being afraid of investing.
One of the biggest bad money habits is that far too many people are afraid of investing and never start.
Here are some reason to invest:
- You can retire one day.
- You never know what may happen in the future, so preparing now is important.
- You can allow your money to grow over time.
I always say, the first thing you need to do if you want to start investing is to just jump in. You’ll never learn unless you make an attempt.
Read more at The 6 Steps To Take To Invest Your First Dollar – Yes, It’s Really This Easy!
If you are new to my blog, I am all about finding ways to make and save more money. Here are some of my favorite sites and products that may help you out:
- Start a blog. Blogging is how I make a living and just a few years ago I never thought it would be possible. I earn over $70,000 a month online through my blog and you can read more about this in my monthly online income reports. You can create your own blog here with my easy-to-use tutorial. You can start your blog for as low as $3.49 per month plus you get a free domain if you sign-up through my tutorial.
- Sign up for a website like Ebates where you can earn CASH BACK for just spending like how you normally would online. The service is free too! Plus, when you sign up through my link, you also receive a free $10 gift card bonus to Macys, Walmart, Target, or Kohls!
- Answer surveys. Survey companies I recommend include Survey Junkie, Swagbucks, Pinecone Research, and Harris Poll Online. They’re free to join and free to use! You get paid to answer surveys and to test products. It’s best to sign up for as many as you can as that way you can receive the most surveys and make the most money.
- Save money on food. I recently joined $5 Meal Plan in order to help me eat at home more and cut my food spending. It’s only $5 a month (the first two weeks are free too) and you get meal plans sent straight to you along with the exact shopping list you need in order to create the meals. Each meal costs around $2 per person or less. This allows you to save time because you won’t have to meal plan anymore, and it will save you money as well!
- Cut your TV bill. Cut your cable, satellite, etc. Even go as far to go without Netflix or Hulu as well. Buy a digital antenna (this is the one we have) and enjoy free TV for life.
- Try InboxDollars. InboxDollars is an online rewards website I recommend. You can earn cash by taking surveys, playing games, shopping online, searching the web, redeeming grocery coupons, and more. Also, by signing up through my link, you will receive $5.00 for free just for signing up!
- Find a part-time job. There are many part-time jobs that you may be able to find. You can find a job on sites such as Snagajob, Craigslist (yes, I’ve found a legitimate job through there before), Monster, and so on.
- Lower your cell phone bill. Instead of paying the $150 or more that you spend on your cell phone bill, there are companies out there like Republic Wireless that offer cell phone service starting at $10. YES, I SAID $10! If you use my Republic Wireless affiliate link, you can change your life and start saving thousands of dollars a year on your cell phone service. I created a full review on Republic Wireless as well if you are interested in hearing more. I’ve been using them for over a year and they are great.
What bad money habits are making you broke?
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The average credit card debt is crazy! If making minimum payments it will take FOREVER to get out and cost a boat load in interest – we still have debt (student loans – car – mortgage) but the highest interest rate it 4.25 and the lowest is .9%
Sadly, many people think that making the minimum payment is all that they need to do. I’ll need to make a blog post about that as well!
I’m sure this is a big eye opener for so many people! The two that stuck out to me were the emotional buying and lack of financial education. Emotion spending is dangerous because we can always find an emotion or reason to make a purchase. We have to put that aside and think about the big picture. And financial education is so important! I’m making it a point to make sure my kids have all the education around finances that I can give them. Starting young is huge!
Yes, starting young is so important.
I’ll admit that investing feels very intimidating. That said, I can’t wait to dig out of debt and start learning about investing my money. Then it can finally work for me!
Happily, I have never been one to care what the Joneses are doing. And now that we have implemented the #yearofno in our home, making decisions about spending is easier than ever!
Good job!
Ignoring the importance of financial education is what gets me. I work in finance, and it amazes me the number of finance specialists who are clueless about their own personal finances. Like an out of shape doctor, they know they should be educating themselves but they continue to push it aside.
It’s baffling. We spend years going to elementary school so we can be prepared for high school, then study during high school to get into a good college, then spend years in college (and thousands of dollars) to earn a degree that will provide a well-paying job. Yet the minute that first paycheck hits the bank account, the blinders come out and most won’t spend 5 minutes educating themselves on what to do with it.
You said it all PERFECTLY!
Keeping up with the Joneses is such a good one (or should I say bad one :)). Moving to one household income (temporarily!) has really opened my eyes…we don’t need a huge house, we can keep our cars for a very long time. We are planning better and saving more.
Thanks for the great reminders!
Welcome 🙂
I am guilty of engaging in many bad money habits. Left and right. In the younger years, we spent money carelessly without thinking about our financial future. What about 401k? What about Pension? What about putting money away in addition to getting a social security check monthly? We don’t think about those things in teenage years or our 20’s or early 30’s. We do what we want instead thinking in the moment and then deal with it later when it comes down to us being broke.
Keeping up with the Jones’s is something almost everyone today is guilty of. That consists of dressing with the Polo by Ralph Lauren when you know you have no job living at home with mommy and still in high school, dressing with the Tommy HIlfiger, Timberland, Gucci, DKNY, and Girbaud clothes in addition to Louis Vuitton when you know you have no life savings whatsoever. All for what? Just to look good and rock the brand name fashion labels. We were young and materialistic back in the day while keeping up with the Jones’ but didn’t care if we had not a dime to our name. As long as we looked good that’s all that mattered thinking in the moment.
And sadly, some people do think they are invisible until the reality of life hits them financially smack dab in the kisser.
Yeah, I was bad with money when I was younger too. Thankfully, I know now!
Not investing is a big one for us right now. We are still trying to find that sweet spot between having a nice savings account built up and wanting to be able to start investing.
Sounds like you’ll be there soon 🙂
Love the example about Keeping up With the Joneses. Whether you’re 5 years old or 40, they’re still just toys in the end! But when you’re 40 the toys are much more expensive.
Haha yes!
Habit #8: Starbucks
But in seriousness, next time you look at the Joneses, consider the fact that they only give the appearance of wealth when in fact their finances are likely in shambles. I’d rather drive a piece of crap and have my kids’ college funds complete.
Bet the Joneses don’t have that.
YES!
It’s silly how people tend to associate the things they buy with their sense of self-worth. There is a certain sense of freedom when a person is debt-free. In the end, people need to find what makes them happy, and material things are not what will get them there.
Yes, I agree.
This reminds me of the expression back in college,
“But I can’t be out of money. I still have checks.”
Hahaha!
Fantastic list! I personally have fallen into a few traps. Maybe the biggest one was the need to “buy” a new car every year or so to keep up with the Joneses. Of course, I was in no position financially to do so, so I “bought” the cars with loans. I kept trying to convince myself that new cars won’t have expensive repair or maintenance bills and “buying” new was better in the long run. Finally, I sat down to really dig into how much debt I had about a year ago (including a car loan). I was shocked! But, it might have been the best thing I could’ve done. Now I know where I actually stand and I am happy to say that I paid my car off 6 months early! Now, on to the dreaded heap of student loans, which I sometimes wonder if my education was worth the price…
Thank you, Bradley!
Sometimes I feel like it’s those two or three bad months that can blow up your whole year. Christmas is a disaster for us every year, no matter how hard we try to “not spend a lot this year.” We suffer the consequences for months. I have tons of family birthdays – both my sisters and a million nieces and nephews, that all come at once, along with Mother’s Day and Father’s Day – that always leaves us wounded. And summer vacation is a sure $3000 on the credit card. Even if you can be perfect the rest of the time, these “bad months” can kill all the progress you make all year. We’re skipping a big vacation this summer. We are out of debt and I refuse to go back.
Good job for realizing this!
Soooo many people think that budgets are only for the “poor.” I hope one day everyone realizes that budgets are for everyone.
Great list. I think the big one for people who make good income is having a budget. We used to think that we’ll be fine as long as we spend less than we make. Once we started tracking our expense, we saw a bunch of frivolous spending. Having a budget isn’t fun in the beginning, but it gets much easier as you keep at it.
Yes, it does get easier.