How to Break Bad Money Habits

What are bad money habits in the first place?  You don’t have to look beyond. Check on your own money habits! I used to be guilty of a few of  these things and I hope my kids wont fall into prey of these financial sins:

  • Are you buying things without much thought of whether or not you have real need for them?
  • Do you excessively use credit cards?
  • Are you acquiring new debts to pay old debts?
  • Are you skimping on savings for emergencies?
  • Are you skipping on insurance?
  • Are you overspending?
  • Are you giving preferential attention to saving for college rather than retirement?
  • Do you avoid dealing with big-picture financial affairs such as taxes, estate planning and investing?

If you answer yes in any one of these checklist, you should have the resolve to break them. If you do not take the leap to change,  they become a perpetual cycle and these will sabotage your financial health and financial peace.

The first checkpoint is your spending habits. Prepare a spending plan (or budget). Discipline yourself to track your expenses for at least six months. When I started recording my expenses, it was such an ordeal and drudgery; but when I was able to reach six months, it became a habit that I have become uncomfortable if I don’t jot down my cash flows in a small notebook which I carry all the time.

 “If you buy things you do not need, soon you have to sell things you need.” What a great reminder from Warren Buffet to put our buying habits in check. Instead, we should buy the things we need most- insurance and healthcare protection.

Sometimes, or in fact, most of the time, our buying behavior has a psychology behind it and documented in the Bible. Ecclesiastes 4:4: “I have also learned why people worked so hard to succeed: it is because they envy the things their neighbors have. But it is useless. It is like chasing the wind.”

Now discover for yourself your buying motives by asking these questions: Do I really need it? If not, Whom am I trying to impress? Advertisements are designed to cultivating the idea that our self-worth and success depend on what stuff we have.

Acquiring things through credit cards t is tantamount to spending money we don't have. In my buying decisions, I subject myself to this self test before committing a purchase, especially a major one. These may apply to you:

  • Do I really need this? Is this a need or a want?
  • Do I need this now? Can I postpone it?
  • Can I get a better price elsewhere?
  • If this is a bargain, is it a current or suitable model?
  • Can I get by with a less expensive version or model of the product?
  • Is the item of good quality?
  • Will I still be pleased with my purchase in 30 days?

Answers to these questions will help differentiate impulse from well researched purchase. Before deciding to a purchase, beyond its nominal price, think of its value in terms of the number of days you need to work to acquire that item. Is it worth it?