We have all made purchases we regret. Maybe it was a piece of clothing that didn’t match anything else you own or a musical instrument that you never learned how to play. We all make mistakes. The key is not to let those mistakes become bad habits. Here is a list of three of the worst financial habits you can fall into.
The Habit: Overspending
We all have essential expenses. For example, we may have to pay your rent or mortgage each month and also any utility bills. We also need to spend money on food and other necessities. Spending on nonessential items can quickly put you in financial trouble and become a bad habit. Unnecessary expenses can add up, whether a shopping spree at the mall or a dinner at a fancy restaurant. If you can afford to splurge, that’s great! But where many people get in trouble is spending money they don’t have on things they don’t need. If you find yourself behind on bills or never seem to have enough money to cover your expenses at the end of each month, overspending might be the cause. People with this habit often turn to credit cards, which can lead many down a path of accumulating debt and financial trouble.
How to break it: If you don’t have a budget, now is the time to make one. Keeping a budget helps you make sure you can and do pay for the essentials and can also be an eye-opening look at where your hard-earned money goes each month. Track your expenses and see where you can cut costs. Maybe you don’t need to go out to a fancy dinner every weekend or buy the latest gadget. Having a budget can help keep your essential expenses in order, help build up savings, and show you what money you have left over for things like a night on the town! Sticking to a budget may be hard at first, but it will get easier over time—as long as you stay consistent.
The Habit: Not saving
Life happens, and we can’t predict the future. That’s why having a savings fund is a good idea. If possible, you should save a percentage of each paycheck into a fund that you can only touch in case of emergencies. No one likes to think about the worst-case scenario, but those scenarios only become worst-case if you don’t prepare for them. What would happen if you were injured and suddenly had to pay several medical bills? How long could you cover your expenses if you or your loved one lost their job? These unplanned scenarios can have a significant impact on your financial situation.
How to Break It: Open a savings account and commit to setting aside an amount from each paycheck to go into that account. Even as that account grows in value, don’t take any money out of it unless you absolutely need it. It may not seem like much at first, but with continued saving you will see that account grow over time. Hopefully, you won’t ever need to touch the funds in the account, but you can live with the peace of mind that it’s there if you ever need that money.
The Habit: Making minimum payments on your credit card
Credit cards can come in handy, especially for unforeseen costs or emergencies. Credit card debt can build up quickly if you are not careful though. Depending on your card’s interest rate, you can owe much more than you might expect over time. While your minimum monthly payment may seem affordable now, you aren’t doing anything to chip away at your overall debt. With interest and possible fees, the balance will continue to grow over time.
How to Break It: Consolidating credit card debt with a personal loan might be right for you. Perhaps you are only paying your monthly minimum because that is all you can currently afford. If that’s the case, you may wonder how you’ll ever get out from under your credit card debt. A personal loan could be a good option. Interest rates for personal loans are usually much lower than credit card interest rates and typically offer better repayment terms. In addition, getting a personal loan to pay off multiple balances will allow you to focus on making just one fixed loan payment each month.
Ready to break bad financial habits? A personal loan from Credit Direct could help! Check rates in minutes with no effect to credit score.