It can be very hard to take control of your finances when you have poor spending habits. Some spending habits, despite how small they seem, hugely affect your finances, making it impossible for you to achieve financial stability. Many of these habits are initially unnoticed until they drain your finances. When you identify these habits, you can make the necessary changes to regain control of your money. This will help you take one step closer to achieving financial freedom. In this article, we will explore common bad spending habits and how to overcome them.
1. Relying on Credit Cards as Your Emergency Fund
While credit cards can be helpful in times of need, it is dangerous to rely solely on them. Making your credit card your backup plan can lead to a mountain of debt. There are high interest rates, and you may feel tempted to keep spending. It is best to have an emergency fund set aside when you face financial challenges. You can create an emergency fund by establishing a goal, like $1000 US, and setting aside $20 US a month until you have reached your goal. It is also helpful to set a specific deadline, which will keep you motivated.
2. Falling for Sales and Discounts
Despite how appealing the “Buy one, get one free” and the “50% off” sales seem, they make you spend on unnecessary items. These flash sales are designed to make you spend. It may feel irresistible, but you should ask yourself these three important questions to prevent wasting money on unnecessary items:
- Do I truly need this item?
- Is it within my budget?
- Would I buy it at full price?
Answering these questions before purchasing the item will help to prevent regret later.
3. Paying for Unused Subscriptions
Paying for subscription services and forgetting about them later is a dangerous habit. These may seem like small, irrelevant fees, but they drain your finances over time. Whether it is a gym membership you are no longer using or a streaming platform you have forgotten about, your finances are being affected. In America, an average of $91 is spent on subscriptions monthly, according to a survey. What’s worse is that half of the subscribers forget to cancel their plan after the free trials end.
You can avoid this by regularly checking on your subscriptions or conducting annual audits in which you list and evaluate your usage. You can also use the pay-as-you-go option or share accounts with relatives when you only use a subscription service occasionally.
4. Impulse Buying and “Little Splurges”
Many people justify their little splurging habit, but they are doing more harm to their finances than good. Whether it is getting coffee, shopping online, or getting a pair of earrings, these “little splurges” add up over time. It is important to treat yourself, especially for all your hard work, but you can develop a bad spending habit quickly if you do not have a plan. To ensure that you treat yourself while avoiding wasting money on “little splurges,” you can do the following:
- Set aside money for treating yourself monthly.
- Implement a 24-hour rule, allowing you to consider buying nonessential items for 24 hours to avoid impulsive spending.
- Consider how the items align with your long-term goals.
5. Letting FOMO (Fear of Missing Out) Dictate Your Spending
Feeling like you are missing out on life can make you spend impulsively. You may see others buying items or experiencing expensive activities that prompt you to follow. However, you will strain your finances by trying to keep up with the lifestyles of others. This will only give you temporary satisfaction.
You can prevent this by setting boundaries and budgeting your recreational expenses. You can set aside money to spend on leisure activities and restrict yourself from going overboard by prioritising things that align with your long-term goals.
