Most people have at least one bad financial habit. Whether it’s impulse shopping, forgetting to pay bills on time or putting off building that emergency fund balancing what you want to do and what you “should” do is never easy.
You might recognize a few of these common bad financial habits in your life:
Ultimately, all of these lead to spending more than you earn and in some cases, bad habits can have a cascading effect.
Here are some ways to turn things around.
Start by identifying bad habits. Sometimes a bad financial habit can be hard to identify. Not sure where to start? Looking through your previous months’ expenses can help you identify purchasing trends or one-off purchases that are part of a larger theme. If you have a budget, you should be comparing projected spending with actual spending on a monthly basis (reviewing online or paper bank statements can make this relatively simple). If you don’t have a budget; now is a good time to start.
Try to figure out what’s driving your behavior. You might need to figure out what triggers your behavior and the reward you perceive afterward before you can change a habit. However, triggers and rewards aren’t always obvious. For example, you might buy big-ticket items when they are on sale because you feel like you’re accomplishing something by “saving” so much. Perhaps you could foster a similar feeling of accomplishment by investing the money in a tax-deferred retirement account and calculating how much it would be worth after years of compound interest.
Aim for healthy financial habits. What habits should you try to adopt? Budgeting is certainly a worthy activity, but also consider the following mix of behaviours and objectives that can help get your finances in order:
Bottom line: It’s never too late to identify potential financial weak points and replace bad habits with constructive ones.
Article used with permission from Practical Money Skills Canada
This article is intended to provide general information and should not be considered legal, tax or financial advice. It’s always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.