Breaking Bad Financial Habits: 2017
We usually reserve the New Year for health or occupational resolutions. While some of these goals may involve a shift in finances, it might be time to look at the financial patterns you have inhabited. There is no time like the present to make changes, and there are no better habits to break in 2017 than those below:
Spending > Earning
20% of Americans spend more money than they earn each month. One of the easiest financial habits to fall into is reckless spending. This pattern is easy to fall into and makes it harder to meet your monthly financial obligations.
CNBC notes that those who spend at or above the level of their earnings can lead to another dangerous habit. Those living from paycheck to paycheck often spiral into credit card debt to try and stop the habit. The problem is, most people are not aware they are spending more than they earn, but by using popular online banking tools you can see exactly how much you are spending vs. how much you are earning. The only real solution is to start living below your means, meeting your higher financial obligations, and controlling your mindless spending.
Slacking on Budget Setting
You cannot successfully reach any financial goal unless you know what your true income is each month, and have a complete understanding of your immediate expenses. It is nearly impossible to meet any goal without having a road map for reaching those landmarks you set. Consider rent, car payments, utilities, groceries, entertainment, and any debt you need to tackle i.e. student loans and/or credit card debt.
With a budget in mind, you will know exactly how much money you must work with each month. Budgeting allows you to avoid spending money you do not have on items you do not need.
Using “Free Lines of Credit”
A line of credit is not free money. You have to pay it back. Credit cards make it seem easier to meet short-term goals or pay for unexpected repairs. But what most forget is the bill you get at the end of the month which comes right out of your checking account. Now you may have no credit card debt but your account is low. With the average household carrying $15,000 in debt, credit cards are the greatest enabler of bad financial habits.
USA Today notes there are many bad habits linked to credit card use, including but not limited to, mindless charging and making minimum payments. It is easy to charge a few things here and there on your credit card, but overtime those items add up and contribute to bad spending habits overall.
If you want to take control of your financial habits, the best thing to do is start fresh in the New Year. Set financial goals you can live by each month, and then expand that to a point where you are working on new, stable financial goals each year. For more information, or specific solutions to your habits contact Indian River Financial Group.