With the new year upon us, it’s normal to reflect on the positive changes that we want to make in our lives. So when January 1st arrives, many people resolve to break their bad habits and establish good ones. Since many people struggle with managing their finances, it’s no surprise that many of these changes revolve around regaining control and building a more secure future. If you are looking to improve your money management skills or finally get out of debt, these are 7 bad financial habits you need to forget this 2023.
7 Bad Financial Habits You Need to Forget in 2023
Your spending habits will set the tone for your lifestyle. If you are spending more than you bring in every month, you cannot establish sustainable habits. Overspending will undermine all your other financial goals. While splurging once in a while isn’t a crime, consistently overspending means that you are setting yourself up for failure.
And if you are prone to impulse shopping, this can be even more damaging. Blowing every penny you earn on things that provide instant gratification prevents any chance of improving your financial situation. Therefore, you must learn to live below your means if you ever hope to get out of debt or reach your savings goals.
2. Overindulging in Your Vices
Many people find comfort and relief through behaviors that aren’t good for their physical and financial health. For example, you may enjoy smoking, drinking, and fast food as a way of dealing with the stresses of everyday life. But, do you know how much it is costing you each month?
The average smoker spends about $1,000 a year and those who eat out regularly can spend the same amount within a month. While these behaviors may be okay in moderation, regular indulgence in these activities can hit your wallet hard. If your vices make it impossible to stick to your budget, then it may be time to kick these bad habits for good.
3. Always Paying with Credit Cards
If you have ever tried to get a loan or line of credit, then you know it’s impossible to obtain anything without a credit history. And credit cards are an important part of establishing that. However, you shouldn’t rely on them to get by from month to month.
If you are unable to pay off your monthly balances, the high-interest rates can quickly bury you in debt, especially if you are only making minimum payments. Those who are already struggling to pay down their debt don’t need this added burden. This is why many financial advisors will tell you to reduce your dependency on them. Monitoring your spending and using cash will make it easy to track your finances.
4. Ignoring Your Financial Situation
As hard as it may be to face the truth, you can’t ignore the reality of your financial situation. Burying your head in the sand won’t make your problems go away, On the contrary, it usually makes them worse. Small issues can quickly snowball into an avalanche of problems.
Therefore, you need to be honest with yourself about your financial habits. Start by assessing your situation to see where you are at. Then, make a plan to track your expenses, monitor your accounts, and regularly check your credit report. Once you know where you stand, you can take steps to get closer to where you want to be.
5. Not Taking Advantage of Employer-Sponsored Retirement Accounts
When you are living paycheck to paycheck, investing in your retirement may not seem as important as keeping the lights on or putting food on the table. While your immediate needs supersede future ones, you have to take action toward future financial security.
An easy way to get started is through employer-sponsored retirement accounts. And the best part is that you don’t need a lot to get started. Even small, regular contributions can grow into a sizeable nest egg over time thanks to compounding interest. If you aren’t taking advantage of your employer matching your contributions, then you are leaving free money on the table.
6. Not Tracking Your Invisible Expenses
Creating a budget is the first step in financial management. However, you have to be sure it is an accurate depiction of your finances.
Everyone knows that you must account for major living expenses like food and housing in your budget. However, many people overlook the “invisible” expenses that are tacked on to your bills. This could be anything from higher interest rates on your loans to increased premiums to hidden fees for services. Things that are easily overlooked and not factored into the final budget can tip the scales and put your finances in the red.
Procrastination is one of my worst financial habits. I often say that I will take action to get back on track, but then never follow through to make impactful changes. Without a doubt, it has hindered many aspects of my life.
However, if you don’t break this habit, it can also keep you from reaching financial freedom. This nasty habit encompasses many negative financial behaviors such as delay in creating a budget, not building an emergency fund, waiting to invest, continuing to pay for unused services, or even paying bills late and accruing unnecessary fees. If you are guilty of this as well, perhaps procrastination is one of the bad financial habits you need to forget this 2023.
Breaking the Habits
Like many things in life, breaking bad habits is much easier said than done, especially when they are deeply ingrained behaviors. But if you are serious about changing your finances in the new year, then you need to commit to taking action. You must first acknowledge your financial shortcomings and then find a path forward. But, don’t beat yourself up if you experience setbacks along the way. As long as you are putting in the effort and making progress, you will eventually reach your goals.
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Jenny Smedra is an avid world traveler, ESL teacher, former archaeologist, and freelance writer. Choosing a life abroad had strengthened her commitment to finding ways to bring people together across language and cultural barriers. While most of her time is dedicated to either working with children, she also enjoys good friends, good food, and new adventures.