The road to being broke is paved with good intentions. You want to save money (we all do). You want to invest in your future and build your credit (why wouldn't you?). But when the time comes each month to do these things, you're either out of cash or have forgotten about these goals.
Bad money habits are to blame, and most of us have them. Thankfully, they're much easier to quit than smoking. Let's look at the top three bad money habits and how you can break each one:
1. Lack Of Organization
This is one of the worst habits because it seems so minor. But over time, lack of organization adds up and sucks funds from your bank. If you lose track of your bills, you end up paying late fees. If you lose track of how much money you've got in an account, you get an overdraft fee. Even poor planning for a night out can result in ATM fees.
Luckily, there's a quick and easy remedy for losing track of your bills: automate their payments. If you set up automatic online bill pay with your bank, you can you keep track of everything in one place—without paper. Plus, you likely won't have to deal with late fees again, so long as you ensure you have enough money in your account to cover these automatic withdrawals.
Here's a trick for avoiding overdraft fees and ATM fees: When you go out with your friends, carry only as much cash as you're willing to spend. That way, you know how much money you can spend (because it's in your wallet), and you won't have to stop by an expensive, out-of-network ATM on the way.
2. Overspending With Credit
Credit is about balance. Having good credit for big investments is not only a good idea, but it's also necessary for things like mortgages, car loans, and having your name on the apartment lease. The trouble is, it's way too easy to spend too much with credit cards—and pay too little back on them.
Think about the difference between wants and needs, and you can cut out a lot of impulse spending. Try to plan ahead of time what you need to shop for and stick with it. Don't be afraid to use your card to build credit or for a big charge, but don't let credit card debt spiral out of control—keep your balance to a minimum.
3. Bad Saving Habits
Saving is something we all want to do, but most of us don't do (or at least don't do correctly). It's a great idea to put 10% of your paycheck into your savings account as soon as you get it—so long as you leave it there. If you spend too much with your credit card, don't make up for it by dipping into your savings. Instead, try to make some extra income or cut expenses elsewhere to cover the cost.
Pooling some money for emergencies is also important. Just do it in a separate savings account, with a cap of around 6 months' salary. Keep the other savings account just for your future.
How To Change Bad Habits At Their Root
The solutions above sound simple, but putting them into practice might be easier said than done. That's because they all stem from something deeper. The first step toward ending these bad habits for good is finding your spending triggers.
The next time you feel the urge to spend money on something, pause and think about what you were just doing. Were you watching TV? Are you at the mall? Write these triggers down.
Additionally, try not to spend money as a "reward" for something you do, like passing a test or losing a few pounds. That way you won't start spending money to make yourself feel better. Once you can recognize why you want to spend money on something, you'll be much closer to deciding whether or not you actually need to.
Create A Spending Plan
It's a lot easier to maintain self-control if you think of your new habits as less like a "budget" and more like a "spending plan." Put the focus on what you can buy, not what you can't.
And don't forget to give yourself a small amount of money for miscellaneous activities. That way, you're being smart, keeping a good balance on investing in your future, and still having fun. The 50-30-20 rule can help your spending plan hit this target: put 50% of your money to fixed costs (rent, bills); 30% to variable/discretionary expenses (food, entertainment); and 20% to saving and debt obligations.
Use available tools, like money-tracking apps and automated payments, to keep up with your spending and make sure you're sticking to your plan. Remember that even big, ambitious plans take lots of small steps to implement, so don't feel bad if you spend too much. Just fix it if possible (return those shoes), and don't put all your money in savings to make up for it.