Habits that Could be Killing Your Finances


credit cards

Think about how many financial decisions we make over the course of a day, a week or a month. Each one represents an opportunity to improve our financial health, strengthen our safety net and propel us closer to our goals.

These decisions form our habits, which in turn help — or hinder — our financial progress over time. While it’s often easy to justify a single instance of impulse spending, doing so routinely can set you back. Similarly, it’s easy to promise we’ll sit down and go through our finances “this weekend” or “next month” or “when things calm down a bit,” but what matters is making this activity part of our routine.

Most of us have bad habits of which we may be unaware because they seem so “normal”. However, they may in fact be killing our finances. 

Here are three examples.

1.Carrying a Credit Card Balance

Every credit card statement offers an easy way out — the option to pay the minimum balance due. However, carrying a balance from month to month becomes increasingly expensive over time.

Here’s a scenario from The Balance illustrating just how much costlier it is to pay the minimum rather than paying the balance in full: You buy a big-ticket item costing $2,500, then make only the minimum payments on it — two percent each month. How long would it take to pay off the item? Approximately 28 years. You’d also end up paying nearly $5,900 in interest alone.

Credit card interest often clocks in between 15 and 25 percent, depending on the terms of the card. Carrying a balance wastes your hard-earned money as it compounds over time. If you’re having a tough time getting on top of your credit card debt, consider meeting with a credit counselor or exploring credit card consolidation.

2.Putting Emergency Savings on the Back Burner

Emergency savings never seem critically important until they are. So, it’s tempting to put them on the back burner, telling yourself you’ll start saving for an emergency once you’re making more money or once you’ve paid off your other debts. The problem with this line of thinking is an emergency can occur at any time. Without adequate savings, you might have to take on debt to handle the sudden expenses.

The key to amassing a strong safety net is consistency. It’s generally more motivational to start by setting a manageable goal and set up automatic deposits for just a percentage of each paycheck to furnish the fund. Before you know it, you’ll have hundreds of dollars set aside and ready at a moment’s notice. Make it a priority to gradually increase that percentage as your budget allows — at least until you’ve tucked away six months’ worth of living expenses.

3.Operating Without a Spending Plan

The idea of creating a budget and keeping it updated over time can be daunting, especially when you’re busy. This is why some people find it helpful to craft a spending plan, then use a convenient app or spreadsheet program to keep track of their behavior over time.

Many of us have connotations of budgets as restrictive, while spending plans are more about making the most of your money so you can afford what you need and want.

Changing your habits in regard to how you optimize your spending, save for emergencies and handle your credit card balances can make a huge difference in your financial results. Small changes in these areas can add up to significant positive gains.