A new year is upon us, along with opportunities for new beginnings. Now is the perfect time to make some big changes in your financial habits. No matter how much you make from your job, some tweaks in the way you handle your monthly salary can go a long way in easing your money situation.
One good way to change your financial habits is to work your way backwards from your typical missteps. Many New Year’s Resolutions involve the correcting of negative behavior, and improving your personal spending habits is no different. Here we go over some common financial mistakes you should work on fixing in the next twelve months.
1. Living beyond your means
Be critical about your needs versus your wants. By being honest about your spending habits, you can set boundaries and more specific financial goals for yourself.
2. Comparing yourself to others
Another common cause of money mismanagement is “keeping up with the Joneses.” Insecurity or peer pressure could drive you to make out-of-character purchases just for the sake of keeping up appearances. Focus instead on what works best for you, and remember that other people could be repeating the same financial mistakes you are avoiding.
3. “Budget? What budget?”
Short-term thinking is the downfall of many when it comes to money. Without a well-planned budget, you could end up living paycheck to paycheck with nothing left over for the future. Do an inventory of your bills, debts, and other regular expenses. Afterward, divide your income toward fulfilling these financial obligations, and prioritizing more time-sensitive payments.
4. Leaving impulse buys unchecked
Yes, this applies to those seemingly small and negligible purchases you make every time you’re at the mall. Even if all your spur-of-the-moment buys run cheap, making a habit of giving in to your impulses could have a huge impact on how you budget your daily expenses over time.
5. Borrowing too much money
Living independently from others makes you think smarter of where your money goes. If you must borrow money, stick to personal loans by banks and legitimate lending institutions because they have formal documentation which can help you when tracking your monthly expenses.
6. Lending too much money
On the flip-side of the debt question, almost everybody has that one friend or relative who always borrows money without paying it back. As harsh as it sounds, sometimes you have to exercise a little tough love by saying “no.” This is doubly important when your own finances are in a precarious position.
7. Missing credit card payments
This can be done by not spending beyond a one month’s paycheck. Start small by not missing a deadline, and follow this through by paying more than the minimum amount after.
It would be wise to compare credit card interest rates, annual fees, and features to find the credit card that suits your needs if you’re just about to get your first credit card. This will help in avoiding bad debt.
8. Paying first and asking questions later
Read contracts before you sign them, especially the fine print where most charges are indicated. Another good practice is thoroughly reading all receipts and billing statements before paying them.
9. Monthly money sinks
Downsizing your luxuries is one popular way to beef up your finances for the long term. Make a list of your regular monthly expenses and take note of the services you use more frequently than others. Utilities like water and electricity are no-brainers, but you might have second thoughts about paying for premium cable TV or making installment payments on the latest trendy gadget.
10. Having nothing saved up for emergencies
It would be hard to look for money to borrow during an emergency. Should you suddenly lose your job or incur huge medical expenses, you should have enough money set aside to support yourself and your dependents for at least three months.
11. Overlooking salary deductions
Be aware of tax deductions, rebates, or exemptions that could be applicable to your current employment. If your job automatically deducts taxes from your salary, get in touch with your Accounting or Human Resources Department to ask about what the deductions pay for.
12. Never checking credit reports
Some countries have dedicated agencies that give you detailed summaries of your credit history, including late payments on your credit card. Make it a habit to check your credit report every year at least, and do research on what warning signs you need to look out for.
13. Foregoing insurance
A good insurance policy – whether it’s health or car insurance– can also serve as a safety net for your finances. Check if the insurance agent you’re talking to is licensed by the Insurance Commission and consult with him on which inclusions you need.
14. Not thinking about retirement
Putting off setting aside money for too long could lead to not having money saved up when you hit retirement. It is never too early to start saving for your retirement. A way to get started is by getting an automated savings account that deducts an amount from your paycheck during paydays.
15. Never ending excuses
Resist procrastinating and making excuses for why you’re not fixing your bad habits. Avoid situations that you know will be a trigger for you to fail on your financial goals such as strolling aimlessly in the mall, or not eating a meal before grocery shopping.
As long as you learn from your mistakes, especially the big ones, you should be able to give your finances enough time to recover. This will help you make this the best year for your finances.
Ready to take the next step in fixing your finances? Try MoneyMax’s online comparison tool and find the most cost-effective credit cards, insurance, plans and more. And while you’re here, check out more helpful articles on the MoneyMax blog.