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Fixing Those Bad Money Habits

23 Mar

Although my mother is a CPA, I am absolutely horrible when it comes to managing my finances. If it weren’t for my husband’s constant nagging I probably would never pay my credit card bills on time, I would forget to make my monthly loan payments, and I would continue getting charged for things I don’t even use any more. Yes, I am what my husband likes to call the Queen of Bargains. I am the one that automatically signs up for anything when I see that I get one month for free, but then somehow forget that I gave them my credit card info and that they have been charging me for over a year. Oops. I often wonder how someone who is educated and driven can be so bad at managing their own finances, but at least I recognize it as a flaw, right?

Recently my husband and I have been trying as best we can to save money. We have dreams of buying a house, nice cars, and furniture that doesn’t look like it belongs in a frat house. While we are making some progress, I think we could be doing better in some areas. My mother recently sent me an article about how to manage your finances and break the bad money habits. After reading the article I realized that my husband and I (mostly me though) are making a lot of the mistakes the experts say we shouldn’t be making. After reading the article I began doing some research and compiled a list of the worst money habits out there. It is my goal to try and seriously tackle the things that I am bad at in an effort to be more financial conscientious and smart. Here are a few of my bad habits and ways to break those bad money habits:

Impulse Spending

I, unfortunately, am definitely a victim of impulse spending. Yes, I know I am not technically a “victim,” but every time I walk out of a store and hang up a clothing item that I know I won’t ever wear I feel like a victim. According to a study by the National Endowment for Financial Education, four out of five Americans that made impulse buys regretted at least one of those purchases. I know that I have definitely regretted certain impulse buys – from clothes to electronic gadgets. While impulse spending makes you feel guilty, it also wastes your money. When my husband and I combined our finances we came up with an amount that we could each spend without having to ask for the other person’s permission. While getting used to this idea was hard, and sometimes really pissed me off, I have come to learn that going shopping with a budget or price limit in mind really helps me from impulse buying. The best way to rid yourself of the impulse spending habit is to keep a number in mind and use cash for the purchase instead of credit card. Also, be cognizant of your needs vs. your wants and be true to yourself when you ask, “Will I really wear this or use this?”

Not Contributing Enough to Your 401(k)

I will admit, I only contribute 3% of my bi-weekly paycheck to my 401(k). My reasoning is that I am only in my second year of working and I have at least thirty more to go, right? Wrong. Who knows what the future holds for me and my husband. Who knows if one day I will have a child that needs me to stay home with him/her, who knows if I will get sick and need to quit work, who knows, who knows, who knows. According to Claire Emory, a financial planner in Arlington, VA, funding retirement is a critical issue for women because they tend to spend less years in the workforce, they live longer and they are not paid as much as men.

Recently my husband and I discovered that we would have to fork over a large amount of our savings to the federal government. Being the mom that she is, she lectured us about not putting enough non-taxable money into our 401(k) plans. According to her, the money that is put in there is not taxed by the government, so put as much as you can away each year. Now, for my husband and I, the idea of putting $10,000 + in our 401(k) each year seems like a LOT when we consider our loan payments. But the more I think about it the more I feel that it is smarter to save for retirement even if we are young, especially if that means paying less in taxes to the government each year. Emory says that contributing 10% of your bi-weekly salary to your 401(k) should be the goal.

Carrying a Balance on Your Credit Cards

My husband never lets me keep a balance on my credit cards, and I know that if it weren’t for him I probably would pay the minimum each month. According to CreditKarma.com, the average credit card balance in 2011 was $6,576. Yikes. Not only does such a high balance rack up a lot of unnecessary money in interest, but it is almost impossible to pay off (unless you are rich). It is important for credit purposes to make sure that you don’t have a million credit cards that you can never pay off. I have two credit cards and find that it helps because they have different payment dates. This allows me to plan which charges go on which cards according to their payment dates. But, no matter how tight money is that month, my husband and I always pay off all of our credit card balances when only the minimum payment is due.

Not Tracking Your Money

 Again, I grew up in a household where my mom tracked everything her and my dad spent. She was the type that kept all receipts and matched them up to the credit card statements at the end of the month. That is smart, but for me I often find myself avoiding doing the same thing. I am a spender who does not ever get a receipt and who never monitors my credit card statements. Yes, I know that sounds crazy, but I do just pay the statement at the end of each month without looking. This turns out bad for me when I am being charged for something I thought was free or later find that I am being double charged for things. Last year my husband started using Mint.com to track our money. He made me put all of my credit card information on the site and was able to literally see every single purchase I made. This, as many women can probably imagine, annoyed me and totally freaked him out. “One-hundred dollars for a hair cut?” Men do not understand what it takes to be a woman, and I am by no means needy or materialistic. But, while Mint.com made him gripe a lot about my purchases, it made me cognizant of what I was spending my money on and what he was spending his money on. We learned that I probably needed to cut back on the bookstore purchases and he probably needed to bring his lunch more often to work. The point I am trying to make is that while tracking your money can be a pain in the a**, it does help you realize what you need to cut back on.

 Not Putting Any Money Into Savings

 There are some adults I know that don’t save any money EVER. To me this is just insane. I mean, how can you not save money? Isn’t that everyone’s goal in life? What happens if tomorrow you lose your job or get cancer and need the money for treatments? What happens if your dog swallows your baby’s toy and needs surgery to remove the object from his stomach? So many things in life could happen at any given moment that, in my mind, a savings is an absolute necessity. My husband and I pay all of our bills for the month and then put whatever we have left over into our savings. We try never to touch our savings, except when necessary. Even if you don’t make very much money, putting just $50 in savings every two weeks will add up over time and give you some sort of cushion in case things go wrong.

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For some people, like me, managing money can seem like an arduous task. It is important to understand where your flaws and weaknesses are in order to make sure that you are financially healthy and stable. What are your worst money habits?