Bad Money Managing Habits To Break In The New Year And How
As the new year approaches, most of us will be buying gym memberships and perfecting meal plans in order to ensure that this time around, our resolutions will stick. And although we agree that taking control of our health is commendable, we’d like to play devil’s advocate and argue that our financial health is just as important. Why not resolve to overhaul your financial situation, instead of your body, in the new year?
As young adults, it’s easy to slip into an anxious mindset regarding ourselves, where do we even start? With student loans tying up our bank accounts and the cost of living at an all-time high, it can seem pointless to try and break our money-managing bad habits. Luckily, it’s not pointless. Taking control of your finances may be tough, but like any difficult task, it’s completely worth it. The best way to start? Break your bad habits! Check out our list of bad money managing habits that have got to go in 2019.
1. Spending Without a Budget
Marking up a budget and sticking to it may seem like more pain than it’s worth, but the amount of help it can make in the long run can’t be overstated. The best part about budgeting is that sometimes you can afford the purchases you’d otherwise classify as a “guilty pleasure”. When you budget correctly, purchases you would otherwise classify as indulgences are no longer cause for guilt–just pleasure.
How to fix it: Use a fun app like Mint to set goals and track your spending automatically. Remember to establish realistic goals when writing a budget that you’re confident you’ll stick to throughout 2019. That means budgeting things that are “unnecessary”, like concerts, movies, and makeup. In the end, you’ll be spending that money anyway, so it’s good to be upfront about it so you can plan accordingly!
2. Racking Up Debt
Credit cards should be used for those really big purchases that you can sensibly pay off over months’ time. It shouldn’t be used for day-to-day expenses like groceries or gas. That’s a surefire way to get you too comfortable with using your credit card and “putting off” full payments once you see how much debt you’ve racked up.
How to fix it: If you’re addicted to plastic, try leaving your cards at home completely. Instead, withdraw your weekly budget in cash and put it in an envelope. Only spend from that envelope throughout the week. Sometimes you need to take extreme measures to create healthy habits.
3. Paying the Minimum on Your Credit Card Balance
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My debt payments, at a year's glance✨ . . $32,633.50 and counting… ????(not including December's payments yet). . It was a little over a year ago when my bestie mentioned Dave Ramsey and his baby steps to me. She lit that fire for me to focus and try to get rid of my debt as soon as possible. So glad she did???????? . . Also, if you watch my stories today, you'll see I have a little over $7500 between me and debt freedom!!! . . #debtfreecommunity #debtfreejourney #daveramseybabysteps #babystep2 #plannercommunity #debtfreeliving #planneraddict #erincondren #daveramsey #studentloans #studentloanssuck
It can be tempting to see the measly $20 minimum payment on your credit card bill and opt to pay that back instead of the hundreds of other dollars that you actually owe. But don’t be fooled by this number–it’s a trap by credit card companies to get you paying interest for a longer time on the balance you owe them. Each month, pay your statement balance in full in order to avoid paying the interest amount on whatever you owe the credit card company.
How to fix it: The best way to stick to paying off your balance in full each month is to be more selective about what you use your credit card on. After all, It’s easier to pay off a $50 balance than a $500 one. In the end, you’ll end up saving money–we promise.
4. Spending More Money Than You Make
This may seem like a no-brainer, but it’s actually one of the harder habits to break. As young adults, we’re at the point in our lives where our income varies wildly year to year. At this time in our lives, it’s not unusual to get a promotion every year that increases our income by thousands of dollars. However, this can be a slippery slope. The more you make, the more comfortable you become developing “big spender” habits. And why not? You’re invincible! Not so. Even if you’re making thousands more dollars than you did last year, it’s still important to track your income and expenses and make sure you’re at least breaking even every month.
How to fix it: To establish this habit, download your bank’s app on your phone and check your account balance every day to keep yourself accountable.
5. Not Having an Emergency Fund
It’s easy to neglect emergency savings when everything is going right. But we’ve all been in a situation where our car breaks down or our laptop dies, or we have to face a high-health insurance deductible from something as simple as slipping on ice. It’s times like these that can make or break a person financially. Commit to putting away 15% of your income into a “Rainy Day” fund.
How to fix it: If the idea of taking money out of your paycheck pains you, ask your bank if you can set up a direct deposit from your paycheck into your emergency savings. You won’t even know the money is missing.
6. Going Out to Eat Too Much
Millennials are the generation most guilty of this. As has been reported, we’re the generation that loves to eat out According to one study, the average millennial eats out five times a week, much more often than their Babyboomer and Gen-X counterparts. Although appetizers here and a cocktail there seems innocent* enough when you’re hanging with friends, it all adds up. $50 once a week at a restaurant adds up to $2700 in the course of the year.
How to fix it: Commit to eating out less at restaurants and spending less when you do. This doesn’t mean you have to run down every dinner invite that comes your way, but at least think twice about stopping off at Chipotle when you’re running errands on Sunday. And when you do go out with friends, skip the appetizer and limit yourself to one drink or no drink at all! There are so many incredible and fun ways to meal prep now, that there’s no excuse for this one.
7. Paying Bills Late
Taking a little longer to pay a bill may not seem like a big deal in the moment, but continuing to do it can have a negative effect on your finances. Late vs. on-time payments of your bill’s accounts for 35% of your FICO credit score. If you fail to pay a bill more than 30 days after its due date, you risk taking a negative hit on your credit report. And as you know, your credit score is connected to every financial move you’ll make in your life. So having a good credit score is important!
How to fix it: Set reminders on your phone calendar for upcoming bill due dates. Make sure the reminders warn you at least a week in advance when a pricey bill is due–that way you won’t feel the monthly whiplash of seeing $300 or more leave your bank account to the bill collector.
8. Buying Things You Don’t Need
With internet shopping, it’s easy to see a deal that you feel you can’t pass up and click away your dollars. But the convenience of the internet can be dangerous. How many of us have ordered a package off of Amazon to almost forget about it when it arrives at our front door? In the new year, pledge to be more mindful of the purchases you make.
How to fix it: A good rule of thumb to determine whether a purchase will be worth it, coincides with how often you think about a potential purchase during your day. If you notice that you think about it once a day or more, the purchase will probably be worth it. Another trick is to create a Wishlist on Amazon or another online store of all the items you’re dreaming of. Revisit the list in a month. If any of them still tickle your fancy and are in your budget range, go ahead and purchase.
9. Not Giving Back
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Children as young as 7 years old are able to detect racial and ethnic discrimination aimed at them, according to a recent study.
But children who are raised with a strong sense of their ethnic-racial identity are more resilient to the psychological harm that such discrimination inflicts, the study also found.
“These findings highlight the importance of reducing discrimination and its pernicious effects, as well as promoting a positive sense of ethnic-racial identity and belonging to partially buffer children in the interim,” said Tuppett Yates, one of the study’s authors and a developmental psychologist at the University of California, Riverside, in a released statement.An abstract of the study can be found at the Cultural Diversity & Ethnic Minority Psychology website, but the full study is behind a paywall. #therapyforlatinx #therapy #discrimination #latinx #poc
As any flight attendant will tell you, it’s best to “secure your own oxygen mask” before reaching out to help others. So, although we don’t recommend giving to charity if you’re drowning in debt and can’t even manage to pay your rent, if you do have some disposable income, it wouldn’t hurt to give back. In fact, studies show that those who donate to charities are happier.
How to fix it: Make a list of causes that are close to your heart or that you’d like to get more involved in. Then, do some research. Find charities that support the same causes you love. But before you give, make sure charities are legitimate and the funds you’re giving go where they’re promised. Use a site like Charity Navigator to vet foundations. After that, happy giving!
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