When it comes to accumulating wealth, some people are born spendthrifts while others have a more cautious approach. Regardless of your financial habits, one thing is clear: if you want to earn more money, you need to avoid reckless money habits. These habits can be costly in more ways than one. From damaging your finances to impacting your relationships, reckless money habits can have a serious impact on your life.
Not everyone knows this, but there are actually six different types of spending. When you have a better grasp on how your money habits align with these spending categories, you can make informed decisions that will have the biggest impact on your finances. Here is a list of six common financial behaviors that you should avoid.
Knowing your value
The first and most important money habit to avoid is not knowing your value. Many people don’t know what they’re worth, which can lead to a number of damaging financial and psychological effects. If you don’t know your value, you might be tempted to accept a job that pays very little or take on extra responsibilities at work that are not worth the extra stress. You also run the risk of devaluing your time, energy, and skills if you don’t have a dollar figure attached to each. Not knowing your value can also have a significant impact on your love life. If you’re not sure what you’re worth, you might settle for a relationship that is not worth fighting for, or you might undervalue yourself and your abilities in bed.
Buying something because you saw it and felt like buying it? Probably not the best financial decision. In fact, an analysis by the National Retail Federation found that almost 80 percent of all retail spending is made under stress. This means that when you’re in a hurry, when you’re hungry, when you’re with friends, and when you’re drunk, you’re more likely to make a spur-of-the-moment purchase than you are when you’re calm and well-fed. If you have a tendency to buy things when you’re not necessarily in need of them, you’re spending money that you don’t have to impress people you don’t like, or you’re just wasting your money.
Disorganized financial habits
A messy desk is the enemy of all beneficial financial habits. In fact, research shows that having less than six financial assets (money, stocks, investments, etc.) is likely to cause anxiety. Having too many financial assets that are not easily accessible causes extreme stress. When you have a disorganized financial system, it’s very difficult to keep track of your money. You might end up keeping money in a jar that is buried under the bed, for example, or you might not know where some important bills are located (like your alarm or cell phone bill). Having a messy financial system can also lead to poor money decisions. If you don’t know where your money is or how it’s related to other financial accounts, it’s very difficult to make sound financial decisions.
Bad debt habit
This might be a surprise to you, but there are actually people who enjoy struggling with debt. Some even derive a sense of pride and accomplishment from it. Unfortunately, it’s a bad money habit to have. The more you have debt, the less money you have to put toward your other financial goals. This includes saving for retirement, paying off your mortgage, or funding your children’s education. How do you know if you have a bad debt habit? If you keep borrowing money and you’re not sure how you’re going to pay it back, you might have a bad debt habit.
This is similar to the bad debt habit, in that it is also related to your finances. You might be investing your money in the stock market, but if you’re investing emotionally, you’re likely to lose a significant portion of your investment. This can happen when you get too attached to the outcome of a particular investment, or when you base your investment decisions on feelings instead of facts. This can lead to some very costly investing mistakes. If you’re investing your money based on how you feel and not on cold, hard facts, you’re doing it wrong.
Monthly bill madness
The last and most important money habit to avoid is monthly bill madness. This is the tendency to go into a complete tailspin each time a bill is due. This can happen any time of the year, but it is particularly common during the spring and summer months. Why do you have this tendency? It’s likely because of the “spring cleaning” mentality that comes with the change of seasons. When bills are due, and you don’t know how you’re going to pay them, you might experience a bout of bill madness. The best way to avoid this is to create a monthly budget that outlines all of your financial goals for the upcoming month. From there, determine which of your bills are behind and work until the last minute to pay them off. This way, you’ll be able to avoid bill madness and make timely payments without going into debt.
Overeating at restaurants
This is one of those habits that sounds extreme, but is actually quite common. In fact, a recent poll found that more than 80 percent of Americans have eaten at a restaurant while they were overweight or obese. Overeating at restaurants is often a result of poor money habits. When you dine out, you’re probably not thinking about the cost of your meal. This means that you might order an entrée that is way too large for one person to consume. From there, you’re likely to inhale several appetizers, desserts, and drinks as well. If you’re having this type of meal, you’re spending money that you don’t have and putting on unnecessary pounds. The best way to avoid overeating at restaurants is to plan ahead. Bring a journal with you when you go out to eat and write down exactly what you’re going to eat and drink. Then, stick to the plan!
Nowadays, it’s more important than ever to have a strong grip on your money habits. Bad habits can build up quickly and cause significant damage to your finances. The good news is that it’s easier than ever to develop better money habits. With a little bit of effort, you can avoid these six money habits and create a financially secure future for yourself.