Money—it is what makes it possible for you to live with a roof over your head and food in your stomach.
However, if spent unwisely, it can cause serious problems. In fact, half of American households don’t have a penny saved up for retirement.
Combine this with a culture that herolds material goods, and it isn’t surprising that many of us have picked up several money habits that are detrimental to our livelihoods. That said, learn 10 money habits you need to ditch today in order to save more and reduce stress.
1. Using Credit Instead of Cash
Credit cards are easy to use. They are that IOU that you can put off paying for months, if not years on end.
Download Branding Resources Guide
Building a brand starts by having the right tools and advice. Download our top 10 essential tools and resources to kick-start your branding.
Still, racking up credit card debt leads to a poor credit score, more interest, and could hurt your chances in securing a traditional home loan, not to mention renting an apartment or purchasing a new car.
Yes, it is wise to use your credit card in some cases—to earn rewards and points and maintain a good credit score—however only use it on items you know you can pay off later in the month.
2. Not Putting Any Money in Your Savings Account
Take advantage of your savings account. As mentioned by The Balance, a traditional savings account is a quick way to gain access to liquidated assets, not to mention you can accrue interest on what you put in.
While the interest has gone down, that is not to say it still isn’t a good finance avenue to take. Not putting money in your savings account on a regular basis means you don’t get to leverage these benefits and don’t have one more diversified financial route to take.
3. Not Having an Emergency Fund Set Up
While technically banks don’t offer an actual emergency funds account, you can still create one on your own. Simply, having liquidated assets that are easy to access is enough. This could be several hundred in your house or in a separate checking account. No matter what means you choose to store the funds, you need to have one set up.
Not doing so increases stress and may put you in a financial bind should an emergency come up. Needless to say, you won’t be financially prepared for that emergency, especially when you think of all the obligations, debts we all are in and the everyday grind and stress we all feel. And, in times of stress, it is important to already have a plan in place so that you can go through the motions in securing the cash.
Get rid of this habit by starting small and setting achievable goals. For instance, set your goal at $500, saving $100 per month. Once you reach that goal, stretch it to $1,000. Consistently raise it step by step. Ideally, you should have at least 3 months of pay saved up to pay for living expenses.
That way, should you or your significant other get laid off, you have some financial legroom and time to look for another job—reducing some of the stress.
4. Not Having a Retirement Plan
As mentioned, 50% of American households don’t have a dime saved up for retirement. This can add stress and can decrease your quality of life. Instead of relying on Social Security and a pension plan to help you out during your post-retirement years, set up a retirement plan that aligns with your financial situation and goals.
Ideally, you may want to speak with a reliable financial professional on this so that you are aware of all of your options.
5. Not Having a Diversified Portfolio
So, you have been depositing funds in a traditional savings account, but that’s it. While something is better than nothing, you can take your positive money habits up a notch by diversifying your portfolio.
This means not only do you continue depositing funds in your savings account but also potentially investing in the stock market, setting up a Roth IRA, traditional Roth, or 401(k). The more financial options you have, the less you have to depend on one savings route to get you past the retirement mark. This is necessary since, for instance, if you put your savings in stock that crash, you will still have available funds.
6. Not Having a Budget
Spending on the go, while exciting, can lead to financial stress in the future—especially when it is time to pay those bills. You need to have a monthly budget outlining all of the bills you have to pay as well as giving you wiggle room for entertainment and have some debt relief.
If you can identify with at least one of these money habits, know that you can take the necessary steps to change it. What other money habits do you have? Have you gotten in debt? How have you gotten out of it? Leave a comment.