5 Bad Financial Habits You Should Stop Today

5 Bad Financial Habits You Should Stop Today.

The secret to financial success isn’t just the amount of money you make, but rather your own financial literacy.

Knowing how much you’re bringing in versus how much you’re spending, where you’re investing and building assets are important places to start your financial journey.

You should also be aware of where you’re wasting money, and where you might have unchecked spending.

It’s just as possible to pay off a $15,000 loan on an income of $45,000 in one year, as it is to find yourself living paycheck to paycheck on a $100,000 salary.

The difference between the two scenarios is financial awareness and responsibility, and the best way to achieve both is to create a budget and stick to it.

The specifics of any budget, of course, is dependent upon the circumstances of the individual, but there are a few universal bad habits that can dramatically improve financial stability once they’re identified and stopped.

1. Frequent Dining Out

Americans on average buy lunch twice a week, spending almost $1,000 annually.

In total, Americans spent an average of $2,625 dining the last year for which data is available, according to the Bureau of Labor Statistics. That’s enough to completely fund a vacation.

Taking these numbers one step further, the money spent on dining out surpassed that spent on groceries.

So despite your long working long hours, your social engagements, and your disposable income, try to add at least $1,000 to your savings by dining out less.

2. Fees and Interest

The two big leeches on any budget are bank fees and the interest paid on credit cards. ATM fees alone bring in $7 billion to banks annually, while interest on credit cards costs Americans almost $50 billion a year.

This adds up to the $32 billion spent annually on overdraft fees.

Bank fees are the easiest to avoid, especially ATM fees. As we all know, both our bank and the competitor charge a fee when you use an ATM. If you need cash quickly, you may accept the fees, but the convenience doesn’t outweigh the expense.

Therefore, having a proper budget and planning your expenses in advance can help you avoid all those fees, and get trapped in the endless minimum-payment cycle of credit cards.

3. Shopping Sprees and Emotional Purchases

Going to a mall and blowing all your money on everything you can get your hands on, is one of the worst financial behaviors people have.

Keep in mind that every store is designed to encourage impulsive purchases. It goes from the candies at the checkout line, to the extra points you get on your fidelity card for items you don’t need.

To avoid this issue, make a point of writing a list before heading to a store. If it’s not on the list, it shouldn’t be in your cart.

4. No Emergency Fund

A visit to the dentist, a prescription not covered by insurance, or brake work on your car, these are examples of sudden expenses that can’t be avoided, even when you don’t have the money for it.

Sixty-two percent of Americans don’t have cash on hand to cover these expenses, leading to maxed out credit cards, or an over-reliance on loans.

Keep in mind that emergency funds should have enough to cover living expenses for at least three months, but preferably six.

5. Negative Cash Flow

People living paycheck to paycheck suffer from a negative cash flow.

In the case of low income, expenses may be higher than the money coming in, but it can also be that you’re losing money every month due to financial irresponsibility.

To fight this situation, break down your net income, bills, and other necessary expenses — including a figure for emergencies — to determine if your negative cash flow is the result of a low income.

If it’s not, print out your last three bank statements and highlight and calculate all the random and unnecessary purchases you’ve made during that time. You’ll be surprised at how much you can save just by paying attention to your finances.

Financial literacy starts with awareness. If you’re not paying attention to where your money is going, you’ll find yourself always short on funds.

Creating a budget will help even the most helpless cases gain control of their finances. But, as with anything, the first step is breaking bad financial habits.

5 Healthy Financial Habits You Should Teach Your Child

College shouldn’t be a place to just go and study academic subjects alone.

It should also be the ideal opportunity for young people to start learning the set of financial skills they will require to cope in the adult world at a time when it’s still somewhat safe for them to make mistakes.

As a parent, you want to give your child space to become their own person, but at the same time, you want to give them the guidance they need to make responsible choices.

Below are 5 financial habits you should teach your child.

1. Basic Banking

If your child doesn’t already have a bank account, help them sign up for one. Ideally, they should choose a bank with a branch near the college.

Some banks even have on-campus branches, depending on the school. This gives them the opportunity to learn how to manage her money and make their own bill payments.

2. Budgeting

Budgeting is an important life skill that many people don’t learn until it’s too late. If you plan to give an allowance at college, try to give your child all of the money in one chunk, either at the beginning of the semester or the beginning of the month.

Make sure they know that this is all the money you plan on giving them and that they need to make it last. When the money’s gone, don’t bail them out.

Teach this essential lesson. If they didn’t do a good job at budgeting for essentials, offer money as a loan that needs to be paid back.

3. Working

Many young adults need to work through college to cover their expenses. Even if your child doesn’t need to work, it’s a good idea to require them to get a job.

Not only will this give them experience that will help them get that post-college job, but it also helps to put money into perspective.

They can plan out each of their paychecks with a pay stub calculator, which will enhance their budgeting skills. When your student is actually earning the money, they can see how hard it can be to work for it.

4. Using Credit Responsibly

Building credit in college means having a decent credit score after graduation. By using credit wisely, your child will be able to easily get an apartment or buy a car.

Student credit cards typically offer low rates. Make sure that your student understands that credit cards shouldn’t be used to finance things they can’t afford.

They should be used sparingly for convenience, and the bill should be paid off each month.

5. Saving

Saving money is an important financial habit that few people start early enough. Even if your student can only save $10 a month, it’s a good idea to have them set that money aside.

It could be in regular savings account for them to use in case of emergency, or to finance a project they have.

A parent’s job is to help his or her child grow into a responsible adult.

During the college years, it’s a smart time to let your students experiment with financial responsibility while still being there when they need you.