I talk a lot about building great habits as a strategy for money management and how strongly ingrained habits can help you build the life you want. Some financial habits we learn from our upbringing and others we pick up over time and may not even recognise in ourselves. Today I am talking about 5 bad personal finance habits that I was falling into and broke (at least for the most part, I’m definitely not perfect).
1. Using my credit card to buy things that I couldn’t afford
I used to pay for things using my credit card and tell myself “I’ll pay it off when I get paid”. This always left me playing catch up and feeling like I couldn’t get ahead. To combat this I put a plan in place to clear off my credit card and look at what spending categories were missing from by budget or where I was constantly under-budgeting. Being more realistic with myself helped me get on top of this.
2. Retail Therapy
I love shopping. Always have and always will. I even enjoy supermarket shopping. You name it, I enjoy it. The issue arose when I found myself emotionally shopping. I would buy things I didn’t need to make myself feel better after a crappy day. This left me with a lot of clutter and a wardrobe full of clothes with the tags still on. I found healthier ways to shake off the negativity of a bad day such as going to the gym and saved my money for spending on things I really wanted or cared about.
3. Falling for ‘treat yo-self’ or ‘YOLO’ mentalities
Yes, we all need to treat ourselves from time to time and yes, it is in fact true that we each only live once BUT that is not an excuse to buy yourself a heap of crap. I used to use these excuses as a reason to spend money that wasn’t aligned to my budget and while I mostly enjoyed it at the time, I often regretted if afterwards. This false self-actualisation is only short term pleasure for long term pain. I realised that the best way to deal with this is to have enough room in my ‘fun money’ budget to allow for some fun and spur of the moment spending.
4. Lifestyle inflation
Every time I would get a pay increase or bonus or start making more money, I would increase my spending accordingly. It became a situation where it didn’t matter how much money I was making because I was spending it all. When I acknowledged this, I made a commitment to keep my lifestyle level in order to prioritise my savings goals. Now, with any salary increase I get, at least 60% but up to 100% goes directly to savings, investment or other goals.
5. Impulse buying
Buying items on the spur of the moment, in particular clothes, makeup and skincare products, that was not part of any spending plan I had, resulted in me having too much “stuff” and a lot of “stuff” I didn’t really want and definitely didn’t need. Getting really clear on my values and my goals and ensuring that my budget was aligned to that helped me guide my spending. I also found that keeping lists of my phone of what I needed to buy and what inventory I have at home, helped prevent me from buying things “just in case” I ran out.
We all have bad habits. Yours might have some overlap with some of mine or they might be different. The important thing is to identify what they are, what the trigger or driver for this behaviour is and come up with a plan to stop them. Your budget and your spending habits should align to your own personal and family values. I challenge you to identify the personal finance habits that are holding you back and figure out how to squash them.
One of my favourite books about habit change is Gretchen Rubin’s ‘Better Than Before‘. To read more about personal finance habits and goal setting read my recent blog posts here. To sign up to my email list and get my free 16 meal planning guide (includes step by step instructions, tonnes of tips and hacks and two free printables), click here and sign up using the subscription form on the right hand side.