Each one of us have some sort of bad habits. In this article I want to focus on the top five bad money habits that make us to save less or keep us as low-income people.
#1. Credit Card Debt
I love using credit cards. When you make your daily purchases, like groceries, buying cloth and so forth, credit cards give a great flexibility. Most of the people do not keep track of their purchase, and at the last day of statement payment, they recognize how much they bought over their monthly budget.
What I do is; each evening or bi-daily, I check my credit card transactions. I transfer funds from my bank account to credit card for those recent transactions. This gives me the comfort of tracking the consumption. So, I will not have any carry over to the next month.
By doing so, if you have emergency life events that exceed your monthly budget, you have chance only keep their amount in your card statement and you have a chance to pay them slowly over several months.
#2. Not to Save First
As the paycheck amount hits the bank account, majority of people buy something for themselves. This is the second big money habit. The first move should always be saving some amount. It may be %5 of the paycheck or 10% of it. Saving amount depends on you. Regardless of the amount, move the first amount to your saving account.
When I used to live paycheck to paycheck, it was a big challenge for me to save first. There were always some payments about my paycheck size. Even in those cases, I used to move at least one dollar to my saving first.
#3. Not to Have an Emergency Fund
Always aim to make an emergency fund worth of 3 to 6 months of expenses. We can never know what life brings us.
I learnt the importance of emergency fund, when I was first laid off. Just a month before I was laid off, I needed a car and bought a used car (a Toyota Prius, which sniffs the gas). I bought the car just two weeks after a meeting with my previous manager. In the meeting she said that I had the best performance ever she saw in that company (she was working for the company more than 15 years, by the way). That meeting gave me the courage to make a higher down-payment for the car. I reduced my emergency fund, and a month later, I had no job. (One hour after they laid me off, I hit the road as an Uber driver to put food on the table)
So, whoever says whatever, work to build your emergency fund.
#4. Not Having an Expenses/Income Book
Very rare people write down their expenses and incomes. Too few people make projections for their future income, saving, expenses so forth.
You may not need a software or a fancy app to keep track of your expenses. A simple excel sheet, or a handy notebook works for the most. I have an excel sheet, I wrote my monthly income, monthly expenses, mortgage, subscriptions, kids’ expenses etc. Recording gives me an insight for my future.
#5. Having No-Profit Expenses & Hobbies
We love to have hobbies. We have to love tracking their costs too. Many people do not make the benefit and cost comparison of their costly behaviors. You can find alternatives for your costly hobbies.
I used to go to a gym. I was paying a regular fee, which seemed less to me monthly. When I do the math for yearly, it was costing me 4 digits. Each day I was driving, parking my car, do the gym. Instead, I start to run every morning. In a few months' time, I saved 3 digits to buy interior sports equipment for the wintertime.
Once, me and my wife decided to change the colors of the rooms. All the contractors quoted $X,XXX. So, we decided to watch free YouTube videos of the pros. In a months' time we were ready to make the paint job. I not only learnt the tricks of painting, but learnt how to hide holes, use putty, use drywall mud, buy a drywall from HomeDepot, screw and paint it. Later, I become friend with a contractor and helped him on four different home projects at my weekends. I turned a costly expense to an income generating hobby.
Everyone can create some saving from their expenses. Plan ahead and do it.
Thanks for reading.