Developing good financial habits can take years to build, but if you do it successfully then the rewards are amazing. Once you have achieved success in getting your finances under control, it becomes easier to keep both you and your family away from the debt. The best part is that maintaining an impressive credit score becomes a reality and you can get the financing that you require in order to fulfil your desire of purchasing your favourite car or your dream house.
In order to offer protection to your financial future, you have to sit down and analyse bad financial habits that you have and also finding out the ways through which you can avoid committing such mistakes on a daily basis. Don’t feel guilty as it is perfectly alright to make financial mistakes. All you need to ensure that such mistakes don’t turn into habits as it can have a negative outcome. I have done extensive research on this topic and toiled hard to get myself out of debt. Let me discuss some of the common habits that you need to develop –
Overusing credit card – I am not against having credit card accounts that come handy in dealing with during emergency situations. But, you are heading for trouble when you use your credit card in extravagant spending that ends up overwhelming your monthly budget. When you realise that the credit card payments, on a monthly basis, is more than your monthly source of income then it is about time that you break this habit as soon as possible.
Offering a solution to this problem, you can opt to use the credit card in a more responsible manner. You should avoid buying something, on a credit card, for which it will take months to pay off. It is a simple calculation, if most of your payments go for paying off credit cards, on a monthly basis, then you are inviting financial crisis. You need to have a comprehension of your own finances and avoid making credit card purchases for which you have to spend the rest of your life making payments. You can also choose to open a savings account that will be used only for making purchases through a credit card. Let us say, if you want to replace your old DVD player, then it is advisable to save up to buy a new one instead of using your credit card.
Overlooking a monthly budget – It has been found that most of the people tend to over-extend their monthly payments as they don’t have a concrete idea as to what is the exact amount that is required for paying the bills and meeting other expenses. One of the best ways in which you can keep a check on your monthly spending is to set a budget for yourself. It is much easier to find people who are not using a set monthly budget and these are people who are usually overburdened by the debt. Setting a budget will simply require the listing of the bills and all the necessary expenses each month and then scheduling the payment procedure on the basis of your monthly payments. There are also different computer programs at your disposal proving to set up a monthly budget. Overlooking the significance of having a monthly budget is a bad habit to develop.
Impulse Buying – This term actually defines the act of buying the products that you don’t necessarily require. The majority of the people don’t keep a check on their impulse purchasing and they end up dragging themselves towards increasing debt. You can avoid landing up in such a situation by planning your shopping trip and only buying the things that you need on a daily basis. You can bring with you the cash you would actually need to make planned purchases and leave your credit card at home. In order to save yourself from impulse buying and seek expert guidance, you can reach out to HSBC for additional information.
Checking Overspending – It is quite easy to let your expenses slip away from your hands, but it is also quite easy to control your spending and ensure that you are only purchasing necessary things. You should keep a check on your monthly spending for a month or so in order to make out what you have bought and what amount you have spent, this will help you in deciding what you actually need.
Planning for Contingency – Most of the people land up in fiscal crisis as they are not prepared for the fiscal challenges and they mainly depend on their credit card to get them out of such issues. Such types of bad financial habits actually force the people to face the situation of increasing debt. The solution for this is to have a savings account in order to deal with such emergencies. The contingency savings account is there to tackle such issues without using the credit cards.
Superfluous Spending – The term redundant spending means when you are not making right decisions with the products and services you want to purchase, this leads you to spend an additional amount of money that you actually don’t need to spend.
You can analyse the things/services that you already have or using and get rid of that is not necessary.
When you have good spending habits, you will end up saving more money. When you have a clear understanding of the steps that you should take in order to keep a check on your finances, then there are more chances that you can avoid debt and the tension that it creates.
Written by Lissa Coffey
Lissa is a freelance writer by profession (currently writes for Followthesteps) with a passion for writing on latest innovations and other interesting ideas. She is an active member and contributor at some of the reputed tech magazines & communities.