Just as there are habits that will make you rich, there are others that will make you poor. Habits aren’t always easy to break, but when you see the damage caused by these common practices, you’ll be motivated to get them out of your life!
Here are seven common money habits that can prevent positive progress:
1. Not having a budget. Everyone needs a budget, even if they’re making a million dollars a year. Spending money is easy, no matter how much you have. If you don’t set some parameters, things can get out of control in a hurry.
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- Sit down with all your monthly bills and set up a simple budget. Keep the little stuff in mind, too, like coffees before work or snacks at the gas station. Those small expenses can really add up.
2. Carrying credit card balances. No one can consistently invest well enough to offset credit card interest. Take a look at your last statement to see just how much your credit card is costing you. Depending on your interest rate and balance, it can easily be thousands of dollars a year.
3. Not setting up an IRA. Time truly is money. Get your IRA set up as soon as possible and put some money in it. The funds you’ll have at retirement are heavily dependent on when you get started. And IRAs are wonderful retirement tools. Fund yours as fully as you can each year and watch your retirement grow.
4. Not saving. If you pay everyone else first every month, there never seems to be anything left over to save. Pay yourself first, and then pay your bills with what’s left. Many employers can have earnings automatically deducted from your paycheck and put into a separate account. Save some money every month.
5. Buying new cars. A new car loses an enormous amount of value in a very short period of time. Look into certified used cars that are only a couple of years old. Frequently, you’ll be able to find a car at half the cost of a new one, with minimal wear and tear. These cars usually have warranties, too.
6. Letting the small stuff get out control. Take a close, honest look at how much the small stuff is hurting your bottom line. How much are you spending on fancy coffee in the morning? Do you go out to lunch every day? How about snacks? Magazines? A soda at the convenience store? Look at your bank statement to see what’s really going on.
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- Small leaks can sink ships. Fix your leaks before they get out of hand.
7. Not taking advantage of your employer’s matching contributions. If your employer will match you 401k contributions, you’re leaving a lot of money on the table. Many employers will match 3-5%. Think about how much that really is, and then consider the effect of compounding interest. Over time, the money they give you becomes worth a lot!
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- Employer contributions should be viewed as free money, because that’s exactly what they are. Would you pass on money that someone handed you on the street, with no strings attached?
As you read through the list above, think about your own money situation. Consider which habits are having a negative impact in your life and resolve to eliminate them immediately. Accumulating wealth can take time, so it’s important to start as soon as you can. Fight these bad habits with everything you’ve got, and watch your monetary success grow year after year.
