Biting our nails, Netflix binges, staying up too late… we all have bad habits that we’d like to give up. Many aren’t that damaging, but when it comes to your money repeated poor decisions can quickly spiral out of control and land you in serious trouble. That’s why we’ve come up with 7 bad habits you can start working on today to give yourself a brighter financial future. Your bank balance will be thanking you!
1. Living beyond your means
If there’s one financial habit you should try to give up as soon as possible, it’s spending more than you earn. Relying on credit cards to fund your lifestyle can spiral into a serious debt problem.
There are many habits that might lead to over spending. Keeping up with the Joneses, an unwillingness to sacrifice luxuries, overblowing Christmas and excessive lifestyle inflation can all play a role. Take this opportunity to have a good hard look at your finances and figure out where you can cut back. Check out our budget calculator if you’re not sure where to start.
If you’re careful with money but your income still isn’t enough to cover your basic needs, then it’s time to seek additional help. Contact the Citizens Advice Bureau for advice, and see if you can find ways to boost your income.
2. Having no emergency fund
40% of adults in the UK have less than £100 put away for a rainy day, according to the Money Advice Service. This isn’t just down to low wages – 45% of those with no savings have a household income of £30,000 or more, whilst 23% of workers earning under £13,500 manage to save a cushion of over £1000.
A lack of an emergency fund makes you vulnerable to life’s unexpected expenses, with a broken boiler being the difference between staying afloat and getting into debt. Instead of relying on credit when disaster strikes, open a savings account today and challenge yourself to put away regular amounts of money.
It’s recommended to have 6 months’ worth of living costs in the bank. You can start small; just £5/week will add up over time. Try setting up a pay day standing order to your savings account to put your good habit on autopilot. Alternatively, why not sign up to one of these money-saving apps?
3. Neglecting your bills
It’s easily done. A bill comes through the letterbox and gets tossed to one side. You promise yourself you’ll deal with it later, but before you know it you’ve missed the payment and are hit with fines, late fees and a possible drop in credit score.
Avoid extra charges by opening and paying your bills as soon as you receive them. It only takes a few minutes if you pay online. Set phone reminders, display letters in prominent places, or start up automatic payments to ensure you don’t forget. You could also try calling your providers to align all your bill’s due dates, preferably to just after pay day. That way you get them out of the way and know exactly what you have left to spend each month.
If you’re deliberately avoiding your bills because you can’t afford to pay them, then get in touch with your provider straight away. They might be able to help. You can also check out our arrears guide for more advice.
4. Not tracking expenses
What you don’t know can’t hurt you, right? Wrong. Not paying attention to what you do with your money is a sure-fire route to over spending.
Small purchases can accumulate over time leaving you unexpectedly short at the end of the month. Make a pledge to keep better track of your expenses and jot down everything you spend in a notebook or a budgeting app. You might just be surprised by where your money is going.
5. Making minimum credit card payments
Whilst it’s tempting to pay down just the minimum on your credit balance each month, you’ll only be delaying the pain. Minimum payments cost you in the long run by increasing the time it takes to pay off the balance, racking up higher interest charges. It also encourages you to spend beyond your means, leading to a poor credit rating and high levels of accumulated debt.
Next time your credit card is due, do yourself a favour and pay off the entire balance, or as much as you can afford. If you feel that your credit card balance is getting out of control then contact National Debtline for help.
6. Not saving for retirement
When you’re in your 20s or 30s, retirement can seem like a long way away, but not planning for your golden years is a huge financial mistake. Compound interest means that the earlier you start saving, the more your money will grow, with small amounts invested now creating big returns in the future.
The recommended savings target for a decent pension is 15% of your income, so it’s not enough to rely on workplace auto-enrollments. Check out this great guide to work out how much you need to save for retirement, then try and increase your contributions by as much as you can. Your future self will thank you for it!
7. Spending on autopilot
Whether it’s the daily Starbucks habit, the £40/month gym membership you never use, or an expensive auto renewal on your car insurance, spending on autopilot can be a huge drain on your finances.
Take some time this weekend to review your direct debits and mindless spending habits, and shop around to make sure you’re getting the best deal. You could save a fortune by renegotiating your smartphone bill, comparing your insurance premiums, or cutting down on the take-away coffee.
We’re here for you
If you’re struggling with money, you can always turn to Ben. Call our free, confidential helpline on 08081 311 333 or use our online chat. We are open Monday to Friday, 8am to 8pm.
Check out our financial health and wellbeing page for more money tips.