It’s a universal truth: when you aren’t careful with your financial habits, your bank account can suffer. Before your money issues get out of hand, use these tips to recognize bad money habits and take steps to prevent them from derailing your financial goals.
Hidden (and Not So Hidden) Fees
Fees are a part of most financial agreements and apply whether you’re opening a new bank account or just got approved for a credit card. If you don’t pay attention to due dates and pay your bills regularly, these fees can take a major toll on your financial health. Small fees quickly add up and deplete your available balance or savings before you even realize what’s happening.
The most common and expensive fees are overdraft fees. Though they are typically outlined in user agreements, if your account becomes overdrawn, those charges may come as a surprise.
Working to stay on top of due dates can help you avoid additional late fees that can sneak up on you. Paying late usually means you’ll pay more, which in turn reduces your available funds for other necessities. Signing up for autopay can help you keep track of when bills will be deducted from your account, and using autopay often comes with reminders, so you’ll always be prepared.
Eating Out and Ordering Takeout
Food is a necessity, but in excess, it can cause a big gap in your finances. Overspending on food usually stems from dining out too frequently. It may not seem like eating out takes much money out of your pocket, but remember that you are most likely still paying for groceries regularly. It is almost always cheaper to eat at home—restaurants charge you for their labor. Even visiting fast food restaurants regularly can put a dent in your money. While so-called value meals may seem cheap, depending on how often you eat at fast food restaurants, the expense can add up to more than you expect.
Everything is okay in moderation—even eating out or splurging on a fancy restaurant—but part of keeping track of your financial health is knowing when to cut back. Decreasing the amount of money you spend on restaurants and takeout will inevitably increase the amount of money that you see in your account.
Plenty of people go shopping to relax when they’re stressed—that’s what “retail therapy” means. Of course, some shopping is necessary, and there are ways to fulfill that want for something new without ruining your budget and overspending. However, impulse shopping is an activity that feels more fulfilling because it can be disguised as a necessity. Spending money on clothes or home decorations can burn a hole in your finances if you don’t really need these goods. If you have extra money to spend and you decide to shop, setting a limit beforehand can keep you accountable and avoid regrets later on.
Both small and large purchases can add up quickly. Companies are aware of this and use advertising tactics that play on your emotions or fear of missing out, which can cause you to buy things you don’t really need. If you feel the sudden impulse to buy something, try to stop for a bit and take a moment to consider why you want it. What do you really want, and will the item fulfill that need? Another strategy is to keep a list of items you don’t really need, but want to buy—for example, a new outfit when your current wardrobe is fine. Write the item down and include the date. After a week, go back to the list and see if you still want to buy the item. You may find that your interest has waned. The advantage of this method is that you can give yourself permission to buy the item if you find that you still want it.
Loans are available to almost anyone, regardless of credit history. While loans and credit cards can be helpful to many people, it’s important to use them responsibly. Using high-interest loans or credit cards just to make ends meet—rather than to finance a major purchase of something you need—can create a seemingly never-ending cycle of debt. Just when it seems you can relax, it’s time to pay back these loans, and high-interest rates can take even more of your money.
It’s easy to become trapped in a loan cycle, especially when you are having a difficult time financially. Short term loans are particularly problematic and often lead the borrower to pay back hefty interest at the end of the loan cycle. Though short term, high-interest loans are advertised as a way to make ends meet and improve cash flow, these loans don’t help your financial health. Staying on top of your money flow will help you avoid a high-interest loan in the future.
Develop Better Habits for Your Financial Future
Anyone can fall on hard times, no matter how careful they are with their money, but developing good money habits can help you weather any future financial storm. There are multiple ways to trim your budget, but it is best to figure out which methods work for your situation. Whether it’s cutting back on impulse buys or eating out, the smallest steps can be the ones that make the biggest difference.