The start of a new year is the perfect opportunity to reassess your finances and turn over a new financial leaf. Here are five bad habits worth quitting this year.
1. Spending without a Budget
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It’s hard to make any financial headway if you don’t track your spending with a budget. Without this official document, there’s no way to tell just how much you’re overspending in certain areas. Don’t take the word “official” too seriously. A budget can be as simple as you want it to be. You can even use an app to track your money for you. Whether digital or analog, a budget shows you where your money goes. If it’s not going where it should, you can redirect your cash towards the important things in life. Once you cover bills, debts, and savings, all that’s left over is yours to play with.
2. Splurging on Impulse Items
Some snacks at the gas station, extra cleaning supplies at the dollar store, and small gifts near the cash register. Few people intend to buy these items when they go into a store — they just manage to find their way into their baskets — but lots of them unconsciously spend their money on little things. Unfortunately, the little things add up — the average American spends $183 every month on impulse shopping. Being more mindful of your budget can help you avoid these splurges, saving as much as $2,100 a year!
3. Pausing Your Emergency Fund
Unexpected expenses can throw off your budget just like impulsive shopping. Except, you can’t exactly control the unknown like you can choose the snacks you buy. You can only prepare for them by saving an emergency fund. Financial experts say to save as much as six months of living expenses in an emergency fund. This hefty goal gives you enough to work with whatever your emergency ends up being — whether it’s a layoff or several annoying household repairs. Many people hit the “pause” button on savings over the pandemic, but this bad habit leaves you vulnerable to the unexpected. If you face an emergency before you have six months’ worth of living expenses in an account, take time to research loans over the phone. Once you compare rates, you can easily apply to get a loan by phone for financial help. Getting a loan by phone is convenient when your emergency fund isn’t big enough to cover an unexpected expense. However, an online loan is not a full-time replacement for savings.
4. Discounting Inflation
Inflation has been one of the biggest buzzwords gracing headlines these past few years, and it’s the reason why everything costs more these days. Economists believe it will remain high for the rest of 2023. This means you’ll have to contend with inflation propping up the prices of groceries, gas, clothing, and household goods. It’s time to accept that inflation is here to stay. Adjust your spending to deal with it.
5. Prioritizing Short-Term Financial Goals
When money is tight, you’re most likely thinking about your finances in terms of the day-to-day. But today’s short-term perspective could be setting you up for failure tomorrow if you aren’t considering your long-term goals. Have you thought about raising a family or retiring one day? Do you want to buy a home or a car? What about paying off debt? You should ask yourself what you want to achieve and add these long-term goals to your budget. Now you know these bad habits, it’s time to break them!