Bad Money Habits That Are Leaving You in the Red

Do you find yourself running low on funds days or even weeks before your next payday? Spending money is so easy that it makes saving money seem hard. Taking a step back to assess your money habits can help identify and eradicate the bad ones that are causing you to have too much month at the end of your money.

Not Keeping Track of Your Spending and Expenses

Today, we spend money without even blinking an eye to the amount that we are paying. Just swipe your card or automate your payments to have fewer worries – instead, get one big surprise any time you check your bank balance. Small purchases will accumulate over time, so it’s best practice to keep track of all your spending either in writing or electronically – as long as it is an easily accessible and tangible record. This will help you plan your spending and ensure that it doesn’t get out of hand and take you by surprise at the end of the month.

Ignoring Your Budget

To successfully set a budget, you need to compare how much you earn with how much you spend. Setting a wild budget that doesn’t realistically cover your expenses will only set yourself up to fail and eventually ignore your budget completely. Firstly, set money aside to take care of your essential expenses – such as rent, transport, food – and then set aside savings for your retirement and emergency fund. From there, you can – and should – earmark a reasonable amount for the fun extras, such as the movies, shopping, or any other indulgences. Allocating for these three areas will give you a realistic budget to work with.

Relying on Your Credit Card

Credit cards are a good way to spend money, considering the merchant discounts, miles, points and rebates you earn. Many local banks even provide better interest rates to the savings account that is linked to your credit card. Despite the perks, it is important not to rely on your credit cards and overspend. If you find yourself using the credit cards to cover the last one or two weeks of the month to tide you over until the next paycheck, then we have a problem. Tapping your credit card is so easy and seamless that you accumulate debt faster than ever before. Hence, it is up to you to act quickly in your payments to avoid the high interest rates and killer late fees. There is nothing wrong with using credit cards but be sure to use them wisely.

Accumulating Excessive Debt

After you set money aside for your expenses, savings and fun extras, you need to look into your debt-to-income ratio: the ratio is achieved by dividing the total of all monthly debt payments by gross monthly income, giving you a percentage called the debt-to-income ratio. Find out how much your debt-to-income ratio is by clicking here & booking an appointment to speak with me.

Credit card bills and loans can be incredibly daunting and many of us do not want to face the truth. Dedicate some time to sort out all the debt you have – be thorough in noting down the amount, the terms of payment, and the incurred fees. Have a full understanding of the penalties if you put off paying your credit card debts or loans. Having the complete picture of your obligations will help you make wiser financial decisions.

Falling Behind on Your Payments

Falling behind on your credit card or loan payments can lead to a debt cycle that is difficult to get out of. For one thing, you are incurring late fees and other charges when you don’t make payment in time or in the minimum amount needed, hence, increasing your debt. Again, it’s daunting to look at the amount you owe every month, but fully understanding the consequences of late payments are key to kicking the bad habit. Tackle the late payments first, then address any spending, budgeting or income issues that have caused you to fall behind with your payments. Keep a reminder on your phone for important payment dates, and keep in mind the exact costs of late payments.

Not Setting Long-Term Financial Goals

Financial goals give you something to work towards. They should be attainable long-term goals such as home ownership, retirement fund, starting your own business, taking a course to upgrade your skills, or even an expensive vacation. Setting goals help you determine the necessary or unnecessary expenditures that take you further away from your desired goals.

Take time to make a financial plan to achieve these goals and review them each year so you can be sure that your spending matches your priorities. Book your appointment with me and I’ll be happy to work this out together with you.

Making Financial Decisions Out of Pressure

There may be social pressures beyond our control that affect our spending choices. It could range from purchasing a luxury item to keep up with trends and fashion, or making life decisions such as having a wedding or starting a family due to the behest of the parents.

When you feel cornered, you may not be considering all the options available to you and end up making a mistake or spending more than you should. You may not be ready to purchase big-ticket items or make life-changing decisions, so giving into pressure will not benefit you financially.

Make sure you make decisions based on your own timing, goals and needs.

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Money and Marriage

(Using this time between appointments and meetings to pen my thoughts down on the relationship between money and marriage. Specifically how the third-party — in this case, Money — plays a crucial role in the make-or-break of every relationship, but not in the way I expected.)

While income had an impact on one’s well-being, it was the perceived financial security that leaves a significantly larger impact.

I got to know of a lady who was married to a rather eccentric fellow. No matter how much her ex-husband earned, no matter how grand the vacations they took together were, her anxiety was ever-present and strangely exacerbated whenever more money was spent. It took me a while to realize that it was the spending habits and personal beliefs around money that her ex-husband held on to that triggered her anxiety attacks. Long story short, this marriage didn’t last and ended up in an divorce.

A couple’s relationship with money is indeed much more nuanced than one might think. In many cases, more money doesn’t necessarily lead to more marital peace and contentment. The presence of financial security (or the lack there of) perceived by each partner can make-or-break relationships, and unfortunately it seems these problems only surface two to three years into a marriage. In comparison, successful couples have shown that they were capable of keeping the relationship together by addressing the topic about money as they would about each other’s terrible hygiene habits and morning breath — by talking about it openly and honestly. 

When a couple has shared financial beliefs to serve as a neutral ground for them to retreat to and discuss methods to face the financial problems together, it helps them focus on the problem than rip each other apart. (Marital arguments about money escalate pretty quickly!) When this common ground is lacking, either one or both partners can be easily tempted to take reckless measures (further and unnecessary borrowing) and actions (filing for a divorce).

For couples who’re newly weds or recently married, it would be good to allocate some time to discuss each other’s personal beliefs and internalised assumptions or rules about money. These assumptions and personal beliefs are what subconsciously drives our daily actions and decisions that we make with money from what we buy, how we live, how we save, and how we plan for our financial future. These assumptions and personal beliefs are also unfortunately commonly outside our conscious awareness, and takes a teensy bit more effort to become aware of and to be emotionally detached from, in order to prevent them from dominating our minds and taking control of our decision-making process in times of financial peril. Finding a common ground can be difficult, and most of the time, it’s not something that magically resolves overnight. Take time and effort to sort out the intricate relationship between money and your marriage, as this will help you and your spouse with larger life transitions expected in the future — a bundle of joy (or two!), family business succession planning, and retirement planning.