Bad habits are hard to break, and bad financial habits are no exception. From spending more than you earn to not saving money or contributing to your 401(k), common money management mistakes can end up costing thousands of dollars every year, in addition to making it more difficult to achieve your financial goals.
Yet as anyone who has tried to give up smoking or biting their nails, giving up old habits can be difficult. One reason some financial money habits are difficult to give up is that they’re the result of financial lessons we learned as children. It's not our fault that we have them!
However, even old habits can be overcome with a bit of effort and hard work. The process begins with recognizing you have them in the first place, right?
Once you’ve identified your money woes, you can begin to think about smart ways to change them. Even if you think your money habits are without flaw, here are seven foolish habits you should work on breaking to improve your money management skills.
So check out the following 7 financial habits that you may need to break.
1. Not Contributing to and Optimizing Your 401(k)
One of the biggest mistakes you can make is not contributing to your retirement accounts like your employee-sponsored 401(k). It's easy to think that you should be saving for more short term goals like getting a nice sports car and that retirement is too far away. But that's not always wise.
If you have a job that offers a 401(k), be sure to take advantage as it is free money. A 401(k) plan is a company-sponsored retirement account that employees can contribute to. Employers may also make matching contributions.
Most people have one but haven't optimized them and just let them ride out. If you could use a little help with your retirement account you can get a free check up. I do so every quarter to make sure my money is working hard for me. A company that could do this for you is Blooom.
Blooom’s technology is built to take the hassle out of making and sticking to your retirement strategy. With most of their paid membership tiers, blooom can optimize your 401k and provide access to a real human advisor.
You can see how your 401k or IRA stacks up in minutes with a free account analysis.
The key to building wealth and planning for retirement is TIME. You can’t buy time, so I would highly recommend that you start today if you haven’t already and getting a free analysis from blooom could be a great first step.
2. Not Checking Your Credit Score
Most people know that a good credit score is important but most people don’t realize HOW important. If you’re striving to be financially independent I’d say that having a high credit score is essential. Why is it important to improve your credit score? Because having a high credit score impacts nearly everything that’s important in the quest for financial independence.
Credit Sesame can help you get there. It will provide you a free credit report card — including your credit score. It breaks your score down and grades different aspects of your credit profile.
3. No Emergency Fund?
Not having an emergency fund is a huge mistake. Often, people find excuses as to why they don’t have an emergency fund. Common excuses being that the money can be used for your retirement or to pay bills. I would suggest that after all basic needs are meant you should start saving for an emergency fund which is typically 6-month living expenses.
You’re likely to get more debt if you don’t have an emergency fund readily available and liquid. If you can't find more ways to save then you can look into having additional sources of income through rewards and loyalty programs like Swagbucks.
Personally, Swagbucks is basically my secret weapon to make additional income for my emergency fund. I have no idea how much money I’ve gotten through Swagbucks but over the years it has to be at least a couple thousand. I use it for everything at this point, including cash back and coupons like Kols coupons and basically any store you can think of. Another site I'm fond of is Clickworker and Mechanical Turk, which work sort of similar.
4. Buying Stuff On Credit
If you don’t have any debt in your 20’s, be thankful. It’s very common to buy things on credit cards and just pay the monthly minimum but likely you are paying high interest on those amounts. Living on your own credit cards will lead you to live paycheck to paycheck, which can be an extremely tough habit to break once it’s formed. This practice can ruin your credit score at the same time.
Restraining from buying things on credit can be challenging, but it is important to develop the habit of living within our means to avoid financial stress and debt. Here are some tips to help you keep your spending in check:
Create a budget: Start by identifying your monthly income and expenses, including all of your bills, groceries, and other necessities. Make sure to allocate some money for savings and emergency expenses. By having a clear picture of your finances, you can avoid overspending and make informed decisions.
Avoid impulse purchases: Before buying anything, take a moment to consider if you really need it or if it's just something you want in the moment. If it's not essential, consider waiting a few days to see if you still want it.
Use cash: Using cash instead of credit cards can help you limit your spending. When you have a limited amount of cash, you're forced to prioritize your purchases and make sure you're only buying what you really need.
Avoid store credit cards: Store credit cards can be tempting because they often offer discounts or rewards, but they often come with high interest rates and fees. Stick to using only one or two credit cards with low interest rates and pay them off in full every month.
Consider the true cost: Before buying something on credit, consider the true cost of the item, including the interest you'll be paying over time. If you can't afford to pay for it in full, you might want to reconsider the purchase.
By following these tips and developing the habit of living within your means, you can avoid the stress and financial burden of debt and enjoy a more secure financial future.
5. Not Having Financial Goals
Neglecting to establish financial goals. If you never consider what you’d like to accomplish in five or ten years, it is likely that you won’t achieve anything by the end of that period. If your goals are established and financial goals are set in your 20s it can definitely help you plan better and concentrate on methods to achieve your goals.
A good amount of stress can arise from not establishing money goals as you tend to work harder to make any kind of advancement towards certain large purchases you may buy later in life such as a home.
One good goal to have is to start automating your savings through the new money saving apps on the market. My personal favorite is the free bot, Trim, which lets you save money with automation. I decided to try it out within a few days, I saved an extra $103.53. It was simple to set up, I linked my financial accounts and Trim went to work. Then the bot found ways to lower my bills and cancel subscriptions. I was surprised to see how much my utility bills were lowered. It also analyzed my spending habits, and much much more. You can try it out with a free trial here and see for yourself how it packs a big punch.
6. Always Comparing Yourself To Others
Keeping up with the Joneses (particularly if they're your parents): The pressure to fit in can function as the subconscious motivation behind lots of poor fiscal choices, but the catastrophe of the unproductive mindset is clear when you can always find someone who has more than you do. Occasionally that pressure can build by believing that you are able to have everything they have and comparing your lifestyle to your own parents’ lifestyle or friends with higher salaries.
If you don’t understand the wealth of your parents (and others) it is because they have had many years to amass their riches and if you try to keep up with them you could set unrealistic goals, which might result in making high-risk fiscal choices.
For example, I’ve tried over 100+ creative side hustles to make money and found that taking surveys is #1 in making steady income on the side. It’s very rewarding to share my opinions with major brands, but I also rake in hundreds of dollars a month from it — and it’s so easy to do!
I primarily do this through the highest paying and legit survey site I've found which is Survey Junkie. This is a free survey app for your phone that pays you to take online surveys, participate in focus groups, and try new products.
And, I really mean free all around – free to join and they don’t charge anything to be a member (they will actually pay you in cash via PayPal). Join for free through this link and get your free registration bonus.
7. Not Paying Yourself First
Not beginning the act of paying yourself. It's a mistake to not pay yourself first, even should you have a high paying profession. You essentially prioritize saving cash by paying yourself first which is how you start to develop wealth. Ideally, this money will be invested.
Individuals that don’t learn to save generally spend all their cash having fun and paying bills. Ultimately, they find there's nothing left to save. If you want to really grow your wealth you can look into start investing in apartments and commercial real estate for as little as $500.
I mean, wouldn’t it be great if you could invest in commercial real estate and apartments without dealing with all the hassle of buying, improving, and re-selling real estate? You don’t have to be a millionaire to invest in these types of properties. You can now invest in large-scale real estate for as little as $500. Through their real estate investment products, investors earned an average of 8 – 11 percent on their money last year, and all without painting a wall or dealing with unruly tenants. There is a reason why they currently have over 200,000+ users, this app really pays you!
If you’re interested, I recommend you sign up for more information from Fundrise by clicking here.
Managing Your Money The Right Way
Being in your 20s and dealing with money is tricky because personal finance is not taught in the education system. This weekend try and be productive in your home or apartment and start taking control of your finances.
By making smart financial choices (and breaking these financial habits above) you will begin to take responsibility for your own financial success and following this website you can continue to learn more about money.
After you have these financial habits in check. You'll consider ways to increase your monthly income and how to make money online fast because you may be low on funds — and time.
You know we've all been there. Personally, I've lost track of how many times I've searched old wallets, cupholders in my car, looking for spare change.
I'm here to tell you I've found a better way.
Spend the next 30 minutes checking these tasks off your list, and you’ll earn $600 fast — without even leaving your house!