Last time, we talked about good financial habits you should start to build in order to have financial success. Today, to complete the picture, we’ve compiled a list of 5 bad financial habits that you need to avoid. Continue reading for useful tips and advice.
1. Shopping to boost your mood
Have you ever bought something you didn’t need just to make yourself happy? Raise your hand if you have. This action is often known as “retail therapy,” an effective stress reliever that many people use consciously or unconsciously to lift their mood when they’re feeling low. According to a 2011 study that looked at 407 adults in three different experiments, shopping positively affects one’s emotions.
Unfortunately, if you consistently use shopping to cope with distress, it will become a habit. According to Ryan T. Howell, an assistant professor of psychology at San Francisco State University, buying repetitively can lead to continued spending despite “harmful emotional, social, and financial effects.”
As a result, the more often you shop after a stressful day, the more likely you are to shop again. Shopping to lift your mood in the short term establishes a relationship between happiness and material possessions. It’s also a link that might be difficult to break and will cause harm to your finances.
A popular solution for pushing emotional spending to the curb is giving yourself a waiting time. For example, if you wait at least 48 hours before making any non-essential purchases, the desire to buy will usually fade after the joy of the moment has worn off. Or you can host a clothing or item share event with friends, and select items amongst a variety of things to satiate your browsing and selecting urge. Then, you trade items for free.
2. Spending on convenience
We all have some financial habits that make life easier, whether it’s picking up a cup of coffee on the way to work or a fast food dinner on the way home. A convenience buy might be a nice treat now and then, especially when you’re in a hurry. However, if you make convenience purchases regularly, the convenience will cost you.
Consider ditching a coffee on your way to work every morning by getting up 5 minutes earlier a few times a week to brew a cup at home. Similarly, instead of buying a fast food dinner, you could learn to make a few simple meals and enjoy them throughout the week. Small tweaks like these can add up to hundreds of dollars over a year.
3. Using credit cards for points
A rewards credit card allows you to collect points on your purchases and redeem them for gifts or discounts later. Who doesn’t love this? But there’s a reason credit card companies offer those rewards, and it’s not out of generosity. Rewards encourage you to spend more.
However, credit card rewards are typically less rewarding than you think unless you use them wisely. For example, you usually can only score a little cashback on your purchases because many cards impose heavy restrictions. Besides, some credit cards have annual reward limits or restrict the highest cashback rates to specific expenditures (such as gas and grocery).
Chasing credit card points will eventually lead you to go deep into debt. Therefore, you should consider getting rid of this bad habit.
4. Having no long-term plan for your debt
It can be scary to think about the money you owe, so some people try to ignore their debts. No one ever enjoys thinking about their debt. However, if you aren’t thinking about it, chances are you won’t be able to keep track of it. This behavior will cause you more late fees and interest charges, plunging you even deeper into debt.
Though debt seems intimidating, it doesn’t necessarily mean that there is no way you can tackle this issue. Keeping track of your debt is a great approach to get started on paying it off. To stay on top of things, create files for all of your receipts, bank statements, loans, and bills. There are several apps that can help you stay on top of what you owe and put you in the mindset to pay it off faster.
Shoeboxed is a receipt scanning and expense tracking app that allows you to scan your receipts and other documents and store them in the cloud. With Shoeboxed, you’ll have the big picture of your finances, including your spending and your debts. Shoeboxed empowers you to manage your finance more efficiently!
5. Not saving any money
Saving money seems to be an impossible mission for many. But if you can manage to set aside some money for the future, even a little bit, it pays off big time in the long run. It may sound paradoxical, but even if you’re in debt, you should get into the good habit of saving.
Saving provides you financial security. For example, if you have money set up for emergencies, you’ll be prepared if something unexpected occurs. In addition, saving allows you to take risks and invest for the future.
It’s entirely up to you how much money you should set aside for yourself first. It’s great to have ambitious goals, but it’s also important not to overwork yourself. Start by creating a budget that includes only the absolute necessities (such as rent, utilities, and groceries), and then decide how much of the remaining money you want to save each month. Don’t forget to treat yourself sometimes!
The bottom line
We all have habits that we frequently engage in, whether it’s a daily fast food meal or occasional shopping. Those can seem harmless, but think about how they’ll affect your bottom line. Even small purchases of $1 or $5 build up over time. Therefore, recognizing and adjusting these bad financial habits can help you build more sustainable finances.
If you’re interested in entrepreneurship stories, business tips, or productivity tools, find more posts like this on the Shoeboxed Blog. Shoeboxed is a cloud-based software that helps individuals and businesses turn their massive paper receipts into digital data. With Shoeboxed, you can accomplish a variety of tasks: scan, store and organize receipts, manage expenses, store business cards and even track mileage for business travelers. It’s simple to install and easy to use. Give Shoeboxed a try today!