Are you stuck with money habits that are getting you nowhere? When we make poor financial decisions daily, these end up becoming habits, and these habits can have long-lasting consequences. Simply put, your financial behaviour can either make or break you. Here are five money habits you must break ASAP in order to have a financially prosperous future.
Making the minimum payment on your credit card
This is a common habit of many credit cardholders, which can actually sabotage your finances in a big way. When you regularly make the minimum payment on your credit card, which is a standard five per cent of your outstanding balance across the UAE, you’re running away from the fact that this balance is debt that eventually has to be paid. And by delaying paying it in full month after month, you’re letting it multiply as a result of high interest rates.
What’s going to happen if you keep doing this? You’ll take years to pay off even the smallest outstanding balance and most of what you pay will actually be interest. So stop hurting yourself financially and make it a habit to pay off your credit card bills in full every month. Better yet, don’t spend more than you can afford to repay.
The topic of budgeting is a hot favourite of financial gurus and personal finance blogs. And in fact, most of us would agree that it’s a must-do to manage finances systematically. How come then do so many of us end up not having a budget at all?
Spending without keeping track of where the money’s going is definitely a habit you must kick in 2018. To do so, you will need a monthly budget that gives you a clear picture of your income and expenses. You can allocate your income towards these expenses and save the rest in a disciplined manner. Your budget will even help you track your saving progress and give you a good idea of where you need to cut back to save more every month.
Delaying saving for retirement
When it comes to retirement planning, sooner is definitely better. The earlier you start working towards building that big fat nest egg, the easier it will be to accomplish your retirement savings goal.
Unfortunately, many of us put off saving for retirement until it’s too late. That leaves us with lesser time to work with, and consequently a heavier financial burden in the years leading up to our retirement.
So, now is the time to get rid of the inertia and chalk out a systematic saving plan for your retirement. Calculate how much money you need to stash away in your retirement fund and put away a percentage of your income towards it every month.
Not saving for emergencies
Ever heard about the importance of ‘saving for a rainy day’? Well, rainy days or financial emergencies in this case, like a sudden job loss or a big medical expense, can leave you blindsided if you aren’t adequately prepared for them.
To prepare yourself for such emergency financial situations, you must, at all times, have about three to six months worth of your monthly expenses saved up in an emergency savings fund. Start working on building this fund if you haven’t done so already, and make sure to replenish it if you ever need to tap into it.
Following your impulse can be a good thing, but it never has a happy ending when it comes to spending money. Impulse shopping can lead you to overspend, exceed your budget and end up with purchases you don’t eventually need.
If you find yourself abusing your credit card to make impulse purchases, lock it up and use cash instead. When you have limited cash in your wallet, you’ll likely think twice before blowing it all on an item you spot in the display window. If you still fancy something that you see at the mall, go back home and sleep on it. By the next morning you would have had enough time to think if it is something that you really cannot do without and whether it’s worth spending money on.