We know it’s hard and we know it can sound judgemental. But, here are 9 tips to break some of the worst financial habits. (We are all guilty of at least a few of these..!)
You buy several days’ food supply with an ambition to cook. But then you don’t feel like cooking or eating what you’ve bought. Or a friend is unexpectedly visiting and wants to go for a dinner. Regardless of the cause, the outcome is the same: you end up buying an expensive meal while a week’s supply of food is rotting in the fridge.
One solution for this problem – apart from not eating out – is to buy food more frequently, in smaller amounts. Instead of buying a week’s supply of food that you may or may not eat, consider buying ingredients for just one or two meals – for example, on your way back from work.
Maybe you don’t have the money to pay them off at that moment. Maybe you’re scared to open them. Or maybe you’re just passively avoiding them because – let’s admit it – your account balance looks better without them. But not paying bills on time can cost you much more than a late payment fee – it ruins your credit score, disqualifying you from cheap forms of credit for years to come.
If your bills are something you always forget about or just don’t want to see, or if they always come in when you’re out of money, you should seriously consider setting up direct debit payments shortly after receiving your salary. This way, you won’t have to worry about running out of money to pay for a forgotten bill. At the same time, if your bills are depressingly high, it’s time to examine them carefully and look for a cheaper supplier and switch.
Ever find yourself spending a lot just after payday only to find yourself with no money towards the end of the month? This is a telltale sign that you are not budgeting, or calculating how much you can allocate each month for various expenses.
The good news is that this habit is easily modifiable. What you need to do is monitor your spending for a month. What are your biggest expenses? Can you reduce them? See how much money you need to put aside for the important and predictable things, like rent and bills. Then figure out your daily or weekly budget for the smaller expenses, aiming to save at least a small proportion of your funds for the unpredictable.
Living payday to payday may seem unavoidable. You feel like you’re not making enough to save. The trick is, individuals often think so regardless of how much they earn. And not having savings can put you into big financial problems if an emergency occurs.
Even if you don’t think that you are able to save, try to reduce the amount of financial commitments that you need to pay monthly – for example, find a cheaper apartment, cheaper media packages, and ways to save energy. If you can, consider whether you can replace your car with cycling or public transport. That will free up some of your money for additional pleasures while giving you access to some spare funds in case something goes wrong.
Ever saved for many months just to end up spending it all on a luxury holiday or shopping spree? While ‘living the life’ for a week may feel great at the time, it ruins your chances of living your life comfortably in the long term.
Instead of paying this price for a moment of luxury, choose cheaper alternatives to a spontaneous trip – or ditch last-minute decisions and book well in advance. This way, you can enjoy yourself comfortably without sacrificing your financial wellbeing, and you might discover interesting and budget-friendly new places that you can visit more often.
Credit cards can make it tempting to think that you can afford more than you really can. But carrying a credit card balance over and over will cost you an awful amount of interest – money that you could spend on other things.
The key to buying all the things you dream of is not your credit card – it’s long-term budgeting and saving. Try to cut down your expenses wherever possible.
If your account balance is low, it only takes an unexpected bill taken via direct debit to bring you into overdraft. The problem with being on overdraft is that it can get very expensive. For example, you may get charged £6 a day for unarranged overdraft, even if it’s just £20 that you owe!
Monitoring your account balance regularly can prevent you from going into overdraft. Many banks also offer the option of receiving free SMS notifications when your account balance is dangerously low – but you have to set them yourself (after all, overdraft charges are one of the reasons why banks make so much money). In addition, checking your funds regularly can help you detect any fraud attempts early on, helping you to get your money back if someone gains access to your account and decides to do some shopping.
While trying to insure any item can accumulate to a large sum of unnecessary costs, it is very reasonable to insure things that you crucially need and cannot afford to replace. Yes, your home. Anything from a fire to a natural disaster can put you into big financial trouble – especially given that your mortgage provider might not really care why you forgot to turn the stove off.
It’s a good idea to shop around for a suitable insurance for your most expensive and important belongings. But make sure to do your research and compare different options before making a choice, as this will help you find the cheapest deal that satisfies your needs as well as a company you can trust.
Yes, we’re talking about all the things you ambitiously buy and then never use – if you’re a spontaneous shopper, you probably know this all too well. You walk by, see something that captures your attention, and tell yourself that it’s worth buying. Then you bring it home, never use it, and tell yourself that it’s still worth keeping because it was expensive and one day you might need it – be it a too-small pair of jeans or the sports equipment that you bought when it was sunny and you were feeling ambitious.
The ideal solution to this habit is to stop doing it – if that’s what you aim for, it might help to make shopping lists, and wait a day or two revising them before deciding what you need to buy. But if a wild shopping spree is something you can’t live without, make sure you keep your receipts so that you can return the items that you end up not using. For older items that you don’t use, the best solution is to sell them or give them away to friends or a charity shop – it’s best to get rid of them earlier than later, as most things lose value over time. Decluttering your house will also help you stay organised and make everyday chores easier. And if it seems overwhelming, you can break it into manageable steps – for example, by selling one item each week.