I successfully quit smoking 20 years ago today – 20th May 1996 (not that I’m counting). Thank goodness, what a filthy habit!!
As anyone who has given up the smokes will tell you, quitting is tough. In fact, I had numerous attempts before I got it right.
Each time I failed, I wondered if it was beyond me.
But looking back on it, it was the failed attempts that taught me about what works and what doesn’t.
When I finally did quit, I was prepared. I knew what got in the way of success and I planned for it. I had a strategy for every eventuality.
And the things I learned from this successful habit change have been used time and time again as I've replaced other bad habits with good ones (like only drinking really good wine!).
Many of the mistakes people make around money and investment flow from bad habits too.
Because bad money habits tend to creep up on you, changing behaviour requires a degree of coordination.
A lot like giving up smoking.
This blog covers 9 bad money habits and how to kick them.
Bad Habit 1- Operating Without A Goal And A Plan To Achieve It
Every great accomplishment has a sound strategy behind it. Winging it might spice up your life, but having no plan is a recipe for disappointment.
Think about your favourite professional sports person or business super achiever. Do you think it’s possible that he or she became successful without first setting up a target and then taking aim? Not likely.
Build a better habit: Don't just react to events. Take control. Work out where you want to be and how you will get there. When you set goals, you go straight and true. You develop purpose, you develop direction, you develop focused and channelled energy.
Learn more about why to set goals here, and how.
Bad Habit 2 - Carrying A Credit Card Balance
Maybe the worst habit of all!!
Suppose you decide to pay off a $5,000 balance on a credit card charging 17 percent interest. If you only pay the minimum amount each month, it’ll cost you at least $7,000 in interest and take years to pay off.
Think what you would love to do with that $7,000.
Build a better habit: One approach to erasing the credit card balance is to cut the card in half and throw it in the bin. Then devote every spare penny to getting rid of the outstanding balance. If you have other pressing debts, you’ll need to make a plan for dealing with all of them. Check out the 70-10-10-10 plan. It's a proven way to sort out your spending.
Bad habit 3 - Failing To Fund A Retirement Plan
There are plenty of good reasons to put off saving for the future. But none of them will matter if you get to retirement and can’t afford it.
The thing is, the future is coming, whether you plan for it or not. The question you should ask yourself is “will I have the retirement I want, or the one that happens by default?"
Build a better habit: Imagine yourself at age 70. Or even 80. Picture concrete details — how you’ll look, your surroundings, what you’ll be doing and who with. The more real your future self is to you, the more likely you are to do something about it. it.
Here's 6 great tips to get your retirement plans in order.
Bad habit 4 - Not Shopping For Monthly Services
Hopefully, you compare options before signing up for insurance policies, internet services or your phone.
But you may be missing savings if you’re not checking prices again once a year or on renewal. For example, one phone call last week saved us $600 per year on our internet. We just told we would go elsewhere unless they sharpened the pencil.
Build a better habit: Put some energy into improving your financial life. Once a year, spend 30 to 60 minutes price shopping for monthly services.
Bad Habit 5 - Play Investing Too Safe
Safe investing is important. But there’s safe, and there’s too safe. Keeping all your money in no-risk accounts means inflation will rob you of spending power slowly but surely.
Build a new habit: Make managing your investments a priority. Learn your investing style by taking an online risk-tolerance quiz. Next, read up on the basics of investing. Then — taking your age and risk tolerance into account — take another look at your investments.
Check out these tips for a better investment experience.
Bad habit 6 - Getting Hooked On Lattes
That $4.50 latte is a wealth destroyer over time. One latte a day adds up to $30+ a week — $1,600+ a year. There’s surely something you’d rather do with that $1,600.
Build a better habit: Substitute new habits you enjoy for the old ones. A latte is a way of treating yourself, so find treats that don’t bust your budget.
Or get a coffee machine for home.
Check out our Espresso Strategy to see how wealth building is actually pretty easy.
Oh! And let’s not talk about buying lunch and snacks every day
Bad Habit 7 - Living Without An Emergency Fund
If you don’t have an emergency fund, you run the gauntlet. Emergencies are inevitable. Life is full of them.
Build a better habit: Make a commitment to the change you want. Write it down and put it where you’ll see it and allow it to reinforce your resolve. Keep the change at the forefront of your mind and tell yourself continually: “I can do this.”
Commit and watch your savings build. If necessary, take on a few hours of extra work each week, whether it’s overtime at work or watching the neighbours’ kids
Bad Habit 8 - Paying Retail
Paying retail mark-up is like setting a match to a pile of cash. Smart buyers find ways to avoid it.
A new car’s value drops the minute it leaves the dealer’s lot. At the end of the first year, it’s worth about 20 percent less. After two years, it’s worth 35 percent less. Three years, it’s about half.
One caution: There are things you should never buy used — hats, mattresses, undies, bathers and tyres, among them.
Build a better habit: If you feel pressure to keep up with your friends or neighbours, ask yourself what it's costing you. Stay out of malls and brand-name stores except when researching products. Read up on prices online so you know a good price when you see it. Shop at bulk stores, online auction sites and classified ads instead.
Bad habit 9 - Using Shopping As Entertainment
We all know people with compulsive shopping habits. Over-spending is a drug. It's addictive and can severely damage your financial security.
Build a better habit: Try a spending fast, remove your name from catalogue lists, stay out of stores and hang out with friends whose idea of fun doesn’t include shopping – or better still, put your credit card in a cup of water and freeze it!
But if none of these habit busters works and you’re still struggling with your shopping habit, you may need help. Debtors Anonymous is a free, nonprofit organisation based on the principles of Alcoholics Anonymous.
Hard core but effective!
Do you have tips for breaking bad money habits? Share them with us.
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