The habits you have built over time surrounding money may hinder rather than help you gain wealth. The truths below may shock you. Thankfully, there are ways to improve your financial situation by making small changes that have a significant impact.
1. Only Budgeting for Regular Expenses
If you have enough funds monthly to cover your mortgage, utilities, food, and other necessary living expenses, that’s a great starting point. But you are sadly mistaken if you think that is a financially secure way to live.
The reality is that you can quickly get off track. All that would need to happen is an unplanned expense, such as the washing machine breaking down.
If you do not have a fund specifically for emergency expenses, you will suffer if one does happen. While your hope is nothing unforeseen will occur, it certainly can and likely will do so. That is simply the inherent unpredictability of life.
Thus, it’s best to start to save money in an account specifically for unanticipated expenses. Doing so will help you be financially ready for what life brings your way, whether it relates to your kids, home, car, or something else.
Make it easier to put this habit into motion by setting up your paycheque so that a specific monetary amount automatically goes into your bank account. You likely won’t miss that small amount, but it can add up over time and provide relief when you need it the most.
2. You are Not Actively Paying Off Your Debt
If you owe money to credit card companies or others, that puts a lot of pressure on your shoulders. Not only do you owe money, but you also will owe more with each month that passes because of interest rates.
Those rates can be high, and the amount increases with the size of the debt. So, it is essential to create a plan to tackle your debt and stick with it.
When you follow a plan, your goal is to be debt-free. By thinking ahead about what steps can get you there, you will be able to create a reasonable roadmap rather than making haphazard payments.
A plan also considers the most important details to get you out of debt as efficiently as possible while maintaining a good quality of life. A thoughtful financial plan considers the total amount owing, the interest rates, and how to get debt-free.
Be sure to assign a date to the end goal. As well, track your spending to help you get an idea of how much of your income you pay into the debt if you’re unsure.
Finally, the plan keeps you accountable for erasing any existing debt based on steps and a timeline.
3. Not Tracking Your Spending
If you only have an approximate idea of how much you spend in total per month and on what, you can easily get off track financially. It is easy to overspend one month without even realizing it in this scenario. You also will not maximize your savings if you have this money habit.
Instead, it is best to track your spending to see how much you save versus spend, on average. When you see that, you may realize that you are spending more than you thought and could instead put some funds into an emergency fund or bank account with compounding interest.
The solution here is to create a budget. Doing so will help you set up systems that you can follow and update as needed. For example, if you get a new job, modify the budget.
Another tip is to only use cash for your spending money rather than overspending with credit. Withdraw money from the bank machine once a week to use throughout the next seven days, and when you’re out, you must wait until the next week. That will help you limit yourself.
Do one or more of these money habits impede on your ability to accumulate wealth?
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The information contained within this site has been provided as general information only and prepared without taking into account your financial position, objectives, and needs. You should consider its appropriateness and seek financial advice before making any financial decisions.