You’re scrolling through Amazon, thinking you’re just going to window shop, and before you know it, you’ve bought a unicorn-shaped pool float, a 50-pack of flavored lip balm, and a self-stirring mug. Oops. Or maybe you’re paying for a gym membership you never use, or subscribing to a million streaming services you don’t actually watch. Maybe you’re buying expensive lunches at work every day instead of packing from home. What about letting your car sit in traffic and burn through gas?
Whatever your money-wasting habits may be, you can take control of your finances if you want to. Stop watching those dollars slip away from you like a greased-up piglet. Grab them by the tail and hold on tight. It’s time to be smart with your money, friends.
More importantly, let’s talk about bigger culprits that might be draining your bank account other than spontaneous online purchases–although these small impulsive purchases dip your balance pretty fast too–but let’s focus on lesser known financial mishaps that can keep you broke, forever.
Unfortunately, there’s a handful of other sneaky, really disturbing ways you might be wasting your hard-earned cash without even realizing it. But if you care about reshaping your financial life, the first step towards financial freedom is identifying and getting rid of old-suffocating financial habits. And then you can move on to making a room for adopting the best financial habits. Here’s a look at the 6 things you need to stop doing ASAP.
01
Credit Card Interest
Never put yourself in a position where you pay credit card debt that’s one of the highest credit card interest you’ll ever pay. Also, don’t use your credit card when you’re not going to be paying in full every month. Most cards have variable interest rate plus prime that gets you an average APR (annual percentage rate of 19.6%) assuming you’re paying 19.6 which is a guaranteed tax-free risk-free rate return.
That’s like the highest interest you’ll ever pay. Because paying off a credit card debt puts you on a hook.
For example, Joe has a balance of 2000 dollars on his credit card and payment is a bare minimum of $60 per month, and the Interest rate stands at 20% we’ll be doing simple math of 2000×20÷12(monthly payment) =33.33 in interest. Now let’s calculate his repayment. If we take 60-33, we’re going to be at $26 and 67 months, aiming towards that which turns his balance to $1,973.33. (2000 minus his principal payment). Now if he’s paying the minimum payment of $2000 which is a $60 per month repayment, how long will it take Joe to pay off debt? We’re looking at 15 years and $4,241. That’s what it takes for him to pay off $2000 in debt. whew!! So you should never pay credit card interest, especially the minimum balance. If you do have it, pay it off as soon as possible.
02
Not Investing
Having zero dollars invested could see you towards a dangerous path. It isn’t favoring you now, or your future if all you are doing is saving your money. The fact that inflation is ever ready to devalue our money relentlessly, makes it a bad idea to keep your entire savings in the bank without having enough set aside for your retirement/future. And given that right now, it’s back in our faces, it should give you a rethink on how to put your money to better use.
And some people do that through investing. Investing your money also means fighting inflation, and here’s an example.
Putting 200 away each month, for example, at 0.5% in a high-yield savings account, gives you 63,000 dollars after 25 years. Whereas if you put the same $200 at a modest 6% on say, a stock market fund S&P 500, at the end of 25 years you’ll have $131, 000. Isn’t that a much more effective way of combating inflation and retaining your purchasing power? Even better, creating a safety net outside of your emergency fund?
Right there, you have created a solid portfolio that is well rounded to weather through thick and thin.
If you’re only saving money you’re losing money due to increased inflation and the minimized purchasing power and that’s because of the interest rate in your high-yielding savings accounts.
Again not investing can be one of the worst things you can do to your future self and your family.
03
Investing More Than You Can Afford to Lose
Now that you know not investing at all is bad, you should also know that investing more than you can afford to lose is just as bad! We all know that investing is a risk assessment (maybe not all of us know), and every investor is compensated for the amount of risk involved in certain investments they take. But the truth is you should never invest in any more than you can afford to lose. If you’re investing in a municipal bond that has little chance of defaulting then you should be expecting a little compensation for that. If you’ll be taking chances new start-up that has little chance of succeeding, you need to be certain on the expected level of compensation to be able to do that as well. So you are compensated for the risk you take.
But sometimes you have to be careful especially how the environment is saturated. Cryptos, stocks, etc. Do yourself a favor, and don’t be in a rush to understand how much you can afford to lose or invest so you’re not tested on too much risk that will probably scar you from losing too much and losing interest completely from investing and building wealth for the future.
04
Spending Carelessly
There’s a saying that that goes like this, “a fool and his money are easily parted.”
That is another way of saying—when we are not saving and budgeting our expenses we will automatically be unintentional about our money and be quick to throw away whatever comes our way (I personally use this quote as a mantra to retract whenever I’m compelled to buy things I don’t need). And many of these impulse spending often lead to regrets as time goes on. That’s why you need to avoid spending carelessly and be intentional about your finances, and that can only be done effectively when you start learning to set a budget or savings plan for all your expenses. In addition, you should be familiar with planning, budgeting, and tracking your monthly expenses. Putting this measures in place helps you cut the unnecessary parts of your expenses, creating space to save up for your dreams.
05
Showing Off Attracts a Lot of Bad Things Than Good Things
This one is a little different, but when it comes to identifying money mistakes, the psychology and social aspect of it is equally important, sadly, many people miss this point. Whether you work your [ass] off to attain your financial goal or you are from what they call “old money” Avoid flaunting to ward off attracting insincere relationships or negative consequences.
If you really want to form or maintain genuine relationships, be careful not to fall into the pitfalls of materialism and superficiality.
Most of the time, showing off attracts bad things–the fake friends and relationships, (people who are only attracted to what they can get from you). That could also very likely chase the good friends in your life away or cause you to over indulge in making impulsive money decisions that cost you dearly. Not to mention when you run dry they’ll take off, and leave you stranded.
At the end of the day, You’ll be lucky to have someone to call a friend. If being attractive is what matters to you, you can achieve that with modesty. There’s something attractive about being modest. Living modestly sends a strong message to people that you’re much more than your money without saying it, that’s what true confidence and attractiveness is all about. Nothing to prove, nothing to lose. And that’s what really matters if you’re after making good decisions that don’t put you or anyone around you at risk. Want to enjoy life? Do the things you love, for example, travelling the world to explore and gain more experience as opposed to a life of materialism.
06
Living Above Your Means
Unfortunately, we live in a world where we feel pressured to measure up to people’s standards. Majority want to show the world or their friends they’re having fun like the rest. And in the process getting eyeballs deep in debt.
According to one report, almost two-thirds of Americans are now living paycheck to paycheck, and fewer than 40% can afford an unexpected $1,000 emergency. If you’re living in a world where you’re overspending and yet you can’t afford a $2000 emergency or don’t have any savings as backup or no investment anywhere. It’s sad to say that you’re threading a dangerous part.
Want financial security, think like the rich, live below your means and seek Investments with higher dividends, save and budget for future events. Also put money away for emergencies.
A lot of times people live above their means just to keep up with the so-called Jones, “instant gratification.” as the old saying goes “don’t hang your basket too high. No matter how much you make don’t be pressured to follow the crowd. “Whatever the latest fashion is I have to have it”. This is a common problem that has affecting the majority. Make a choice today to be better .
Closing Thoughts
You should never live for the sake of simply acquiring money or holding money. Doing that puts you at risk and puts you in danger of losing everything. (that’s a terrifying way of going through life). See money as a tool to be use to acquire wealth, that way you can protect your future self, family, and even give back when you can.
Spending wisely, saving for retirement, and investing equates having a balanced portfolio that can help you weather through life’s storms. Hopefully, this article will help you start taking back control of your finances.
