How often do you pay attention to your income and expenditure? Taking a reality check and assessing your finances regularly can help you evaluate where you are financially and make changes where required. Bad money habits can be easy to slip into, and without acknowledging how and when this is happening, you will be repeating the same mistakes repeatedly. If you have plans for taking on a mortgage in the future, bad money habits can have a tangible impact on your chances of being accepted.
So what are bad money habits, and can you do anything to break them?
Brits waste an astonishing £9,000 on average each year on nonsensical purchases. From a night out at a restaurant to an evening at happy hour with friends, this amount covers everything from bottled water to cups of coffee on the go.
Nonessential spending takes away money that could be used for more important things, such as making mortgage or rent payments, reducing credit card debt, paying off student loans, or putting money down for a comfortable retirement. In fact, it’s a component of nearly every healthy budget and happy lifestyle out there. It is not necessary to ultimately stop non-essential spending to improve your financial situation. However, taking a close look at it and making cuts where you can is an excellent first step.
Not Having A Rainy Day Fund
Emergencies happen when you least expect them – it’s why they’re called emergencies! An accident, two flat tyres, or a sick pet can quickly cost thousands of pounds, especially if you are unable to work for any period of time.
Having no emergency savings can put you in a financial bind. It may force you to pay a bill using a high-interest credit card or default on your rent. Ultimately, it forces you to choose between spending and skipping bills, which is never a desirable situation. But don’t beat yourself up if you don’t have one. According to estimates, over half of the British population have no emergency fund.
Remedy this by putting a small amount into a savings account every time you get paid. Start small, and then when you don’t realise you miss this amount, increase it to start building up savings slowly.
Blowing The Budget
Blowing your budget can be overextending yourself on bills, relying on a credit card you can’t afford to pay back in full or spending too much money on living your life. Having a budget allows you to have some control over your life and assess your spending. Check out Money People to see what you can do to change your approach to your finances and develop better habits.
Start by tracking your income and essential bills, then make a list of all the other purchases you make each month. This will give you a better idea of exactly where all of your money will be able to create a more effective budget. If the issue is your bills and essential payments exceed your income, you may need to address your current employment and look to increase how much money is coming into the household to help you manage easier.
Take it slowly so you can be confident any changes you do make are more realistic and easier to commit to long term to make a difference.