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.
Money Management 101: 7 Foolish Financial Habits to Break Right Now
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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.
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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.
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.
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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.
If you do use your credit card to shop occasionally at least look into a money saving app like Paribus.
The down-low of the Paribus app is that you instantly get refunded on items you buy with your cards when the price of those items drop.
It’s like price matching, but after the fact!
And Paribus will do all the work for you.
Once you sign up for Paribus, it will scan your emails for any purchase receipts from dozens of online retailers.
Paribus will then track the price of the item(s) you purchased and give you an instant refund when the price drops.
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 starting automating your savings.
The free bot, Trim, lets you save money with automation and within a few days…
…I saved an extra $103.53.
I linked my financial accounts and Trim went to work.
It found ways to lower my bills and cancel subscriptions. I was surprised to see how much utility bills were lowered.
It also analyzed my spending habits, and much much more. This free Facebook Messenger bot packs a BIG punch.
Bottom line: It was able to save me some money. More people should be using Trim.
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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.
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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.
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Money Management 101 Can be Simple
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!