It seems like everything is more expensive these days. So it’s smart to watch your budget and make sure that you’re doing everything you can to make your money go farther. But sometimes it’s your habits that are the problem. Here are eleven financial habits that are costing you a lot of money.
Not having a budget
I know – many people break out in hives at the mere thought of a budget. They feel like it’s a straight-jacket and something that limits their freedom to enjoy life. They see it as a ball and chain and they just don’t want to mess with it.
But a budget is a financial habit that will help you take control of your money. Because until you sit down and actually look at the money coming out compared to the money going out, you’re simply playing Russian roulette each month and hoping that you’ll have enough money to pay for everything.
Instead, take a look at the numbers. Get up close and personal with your income and expenses. Take a look at your spending habits. This is the cold hard reality of your financial situation and you need to become intimately familiar with it.
Because once you do, you can create a plan that puts you in charge of your money and lets you figure out where you want to make changes. It also lets you see where you can cut expenses so that you can save money and start putting it to work to earn more for you.
Not having a set time each month to pay bills
Having a set time to pay bills each month is an important financial habit because it’s the only way you can make sure that your payments get to where they need to be on time each month. You’ve likely noticed that the period between when you receive your bills and the deadline for paying them seems to get shorter all the time. Pay attention to this and schedule accordingly. You don’t want them to be marked as late payments.
Some people fall into the bad financial habit of always paying their bills late. This is a serious mistake! When you pay bills late you end up with those nasty little late fees that are just money out of your pocket and into someone else’s with no benefit to you.
And unfortunately, with universal default (thank you Congress and lobbyist) you can end up with interest rates raised on credit cards and such simply because you were late paying some other bill.
In other words, you get punished by someone else because of something that didn’t even impact them (grrrr!!!).
Personally, late fees tick me off and I do everything I can to avoid them because I like keeping my money myself, thank you very much.
Having utilities cut off
I’m a little obsessive about getting my bills paid on time (which is a good financial habit to have), but I’ve known people who regularly had their utilities cut off because they were late paying the bill. And unfortunately, to get the utilities turned back on they generally had to pay an extra fee…in addition to paying the bill.
This is where it would be cheaper to just pay the bill on time in the first place and to not get behind. It’s expensive to pay additional fees and it only makes the company richer while you get poorer.
Now I do just want to make a statement here. I do realize that sometimes things happen that aren’t our fault. A roomie doesn’t pay their share of the bill and you’re in a mess. Or someone doesn’t pay some other money they owe you so you’re short on funds. I’ve had friends…and even kids in this situation and they got to suffer the consequences for someone else’s failure to live up to their obligation.
All I can really say is that in these situations, do whatever you can to get by and if the person does this regularly, look at how you can get separated from them so that they don’t have the ability to negatively impact your own finances.
This is one that the banks love because it’s like you giving them free money.
It’s also why it scares me to death when I see people who don’t bother to keep track of what’s in their bank account. It’s so easy to forget about some bill you paid with your debit card and lose track of how much money you’ve got. Personally, I still keep an old fashioned check register and I record every debit card purchase before I ever swipe the card.
Yes, I’ve had people look at me funny (and I’m sure they were thinking that I was a total dinosaur) but I don’t care. I like knowing that I won’t get myself in a bind because I wasn’t paying attention to the balance. And even though the bank might “float me”…it always costs. It’s a financial habit that has served me well.
Paying bills with credit cards
Okay, there may be times when you have absolutely no other choice but to pay a recurring household bill with your credit card. But you need to know going in that it’s going to cost you more than if you simply paid straight from your bank account.
But if you have to pay with your credit card, then make plans to pay off the balance as soon as possible.
However, a caveat to this advice…I’ve known people who strategically planned to pay their household bills with their credit card because they had some perk they were taking advantage of. And they were religious about paying the balance in full each month so that they didn’t run up interest charges on the amount.
But it’s something that they planned out for a specific reason. So again, be strategic.
Not taking advantage of employee benefits
I was never fortunate enough to work for an employer who offered many benefits. Public schools aren’t rich and they’re struggling with funding all of the time.
However, one district I worked for did offer a matching contribution to a fund for a couple of years and I was thrilled to be able to take advantage of it. I was very sad when the matching contribution was cancelled a couple of years later and was always jealous of my friends who worked for companies that offered financial incentives for savings and other retirement programs.
Because here’s the thing…if an employer will match funds, then that’s like a boost in your pay and you’d be foolish not to take advantage of it if you can. Get every dollar you can out of your employer – it’s financially smart on your part.
Not setting money aside from the time you start earning
This is a mistake I made when I was a young teacher that I’ve regretted for ages. In fact, I regretted it so much that I voiced my mistake to my own kids from the time they were old enough to understand anything about money. Our daughter took the advice to heart and started setting money aside when she landed her first job
It’s always nice when your kids actually DO learn from your mistakes.
Here’s the reason we tend to make this mistake…or maybe it’s simply how I justified my own stupidity: We tell ourselves that we need every dollar in our paycheck and that we can’t afford to have any money held out.
And I’m not saying that it might not hurt a little bit. But I can tell you from the experience of age and having made this mistake…a few dollars out at the time hurts less than not having what you need when you’re older or retired. It’s easy to be totally focused on the now because the future feels so far away. But it isn’t as far away as we tend to think, and if we’re lucky then we will find ourselves old one day.
Setting aside money regularly…and before you even see it…is a financial habit that you’ll be extremely grateful for when you’re older.
Buying more house than you can afford
This is an easy but expensive mistake to make.
You start looking at homes and the realtor (or bank) takes a look your financial information and the first thing you know you’re told that you can “afford” a more expensive home than you originally intended to look for.
It’s happened to us every single time we’ve been house hunting.
Fortunately, we didn’t listen to those who were trying to push us into a more expensive house than we knew we could really afford.
Because it’s not just the house payment you’re looking at.
It’s the taxes…and insurance…and maintenance…and all those other things that end up costing you money above and beyond simply the house payment.
But it’s a trap that can get you in over your head in a real hurry.
Any time you are looking for a house, YOU need to determine how much you can realistically pay. This isn’t a decision to be made by people who will 1) make a commission off of your purchase, or 2) be making interest back off however much you end up borrowing. These people have a financial interest in getting more money out of your pocket.
So buyer beware.
Buying expensive cars
Here’s another area where you don’t need to pay extra just because you can (assuming that you can).
Now I need to admit right here that I see cars as merely a way to get from Point A to Point B and I don’t give a hoot about the status of a particular brand. That’s because all cars depreciate in value the minute you drive them off the lot.
So if you can find two cars that both fit your needs and everything else is comparable (mileage, condition, age), then do your bank account a favor and go for the more affordable vehicle.
Let’s just say that even if I won the lottery tomorrow I would not run out and buy a more expensive car. I happen to love my Kia Optima and wouldn’t trade it for anything more expensive even if money if I had money to burn.
Not being on the same page as your partner
Of all the financial habits that will make your life difficult, this one is probably the most difficult to deal with.
When you and your partner aren’t on the same page when it comes to your financial habits and goals, you’ll frequently be at cross purposes. If one of you is a spender while the other is a saver, there will be conflict and disagreements. And it will be common for one partner to undermine the good habits of the other.
Having those hard conversations about your money and your money goals are the first step to getting your goals into alignment. Or at least towards being able to reach a satisfying compromise so that you’re both satisfied that your money needs are met. And if you don’t agree the first time you have the discussion, then keep coming back to it until a resolution can be met.
Your bank account depends on both of you rowing in the same direction!