When it comes to managing your money, forming good financial habits is key so that you can make your cash go further. Unfortunately, many of us are guilty of forming a few bad habits when it comes to our spending – like dipping into our savings, racking up hefty credit card bills and not sticking to our monthly budget. These are risky habits to have, as they can end up with you finding yourself in debt. But don’t worry, there are things that you can do to manage your unruly spending and work your way to a better financial situation – read on for a few financial habits that you should get rid of for the better.
Spending your emergency fund
An emergency fund is a pot of cash that we should all have so that we have money to fall back on in case we find ourselves faced with an unprecedented expense so that we don’t have to rely on payday loans. Ideally, you should be putting money to one side each month for savings that you can use if you find yourself in this situation – however, it should only be used for exactly that – emergencies! A bad habit that many of us seem to get into is dipping into our savings to pay for other things that are not essential. This means that when we are faced with an emergency, we won’t have the cash to pay for it. Try not to get into the habit of dipping into your savings for unnecessary spending, as this can harm your finances.
Not sticking to a budget
Creating a budget makes it so much easier to track your spending and live within your means. Not having a budget in place to take control of your finances means that you could be overspending in areas that do not require it. Take the time to work out your primary spending each month – this means mortgage or rent payments, insurance, food shopping, or anything that you can’t live without. Once you’ve added them together, take the total away from your monthly income and see what you have left over. You should ensure that you include savings in your budget too so you can stay consistent. Budgeting means you can manage your finances, get to know your income and outgoings, and reduce your chance of ending up in financial difficulty.
Spending too much on credit cards
Credit card debt can land you in a difficult financial situation, especially if your spending gets out of control. A credit card can be tempting as you feel like you’re not really spending any money – until you have to pay it back! Although credit cards can be useful when it comes to helping you build a credit score, they can end up doing you more harm than good, so if you feel like you are struggling to reign in your spending, here are a few ways in which you can make a change:
- Limit yourself to how much you’re allowed to spend on your credit card each month, this will help you to keep your spending under control and means you’re more likely to be able to pay the bill.
- Take credit cards out of your wallet, this way you won’t be tempted to use them out of habit which means you won’t be able to rack up spending that you can’t afford to pay for.
- Paying more than you need on your credit card bills each month means that you will pay them off faster. Make sure you stick to paying your credit card balances in full each month to ensure that you don’t incur any extra interest or fees.
This is another habit that can land you in financial difficulty if you don’t take control of it whilst you can. Impulse buying can refer to anything that you purchase that is not featured in your budget. There are lots of reasons why we might impulse buy, for example, if we are feeling sad, we may decide to treat ourselves in the hope that it makes us feel better. This is normal, but most of the time, it doesn’t work! It may also be a habit that you’ve gotten into, for example, if you buy a coffee every day before work, this is an impulse cost that you could cut to save money. Impulse buying can eat into your monthly income and can result in you wasting money in unnecessary areas. Making a budget and sticking to it is a great way of curbing your impulse purchases.