Money management, while you’ve a fixed income, can save you from financial crisis or getting into debt. Maintaining a budget is very important if you want to lead a financially stress free life. If you’ve control over your money and good spending habits, you won’t have to struggle with debts. However, the life that most Americans are leading is quite different from an ideal budgeted financial life.
Your lifestyle comprises of few very bad spending habits. You are so habituated of doing those few things that you don’t even realise they are wrong and affecting you financially. You might have a cuppa worth $4 everyday for five days a week. If you realise that you are actually spending $960 a year for cuppa, you might have stopped it earlier only. This is just a small example, but, it’s important to give a thought over those spending habits which ruin you financially. You do something on a regular basis without realising the circumstances and these bad habits add up in a big way. You end up saving no money and spending on things that you don’t need. It’s not possible that you get financially broke suddenly, or you are in a lot of debt accidentally. There are few spending habits that lead you to a condition like this. Find below some of them.
1. Spending more than you earn
It’s very easy to spend money these days, without actually holding it in hand. You’ve a lot of options like writing a cheque or swiping your cards. Just because you’ve money in your bank account, you feel free to spend it. Is it really necessary to spend all you’ve? The answer, of course, is no. Instead, it’s important to save for a better future ahead. It’s absolutely illogical that you earn $1500 and spend $1800. However, the truth is you end up doing it. As the modern banking and credit system helps you, it equally has disadvantages. You don’t realize how much money is left in your account if you’re swiping cards. This might lead to empty bank accounts and negative balance in your credit card.
Try maintaining an account for emergencies. You can automate your account in which a fixed amount will be transferred into the emergency fund account. By doing this, you can save money and won’t even feel that you’re cutting off on spendings. You need to make a strict budget and stick to it. Your budget must include every single thing you do, be it eating out, a coffee or even a medicine you buy. Make your monthly budget keeping in mind your monthly income, and follow it.
2. Not budgeting
It’s impossible to save money regularly without budgeting. It shouldn’t be a monthly or yearly concept, budgeting should be done and followed on a daily basis. It’s one of the best ways to keep away from debt or any kind of financial problem.
3. Impulsive shopping
There is a rush to do something and you might just want to do it then and there. You went to accompany a friend for her shopping, you saw a pair of heels and you feel that you can’t stay without them. You spend what you hadn’t planned for something that was not important until you saw it. Another example is you suddenly remember the taste of a pastry from a particular bakery, you desperately want to eat it. You can’t do anything unless you get to eat that pastry. You go and have it, that satisfies your taste buds. You don't realize how big a hole in your pocket it makes. These impulses are not very rare, they happen mostly but for different things and you fail to recognize this habit. It’s very important to control these impulses and curb this habit.
4. Buying products you don’t need
Sale is the best time you can shop around, Isn’t it? You love shopping when the sale period is on. However, you fail to realize that you don’t need a particular item, but if it’s in lower price you tend to buy it. You shouldn’t swing at every sales pitch that comes your way. There are mostly discounts on the second item, like if you buy a shirt, the second shirt will be discounted at 20%. Ultimately, you take a discount on the product you didn't need and also end up paying more. It’s important to reassess every purchase you are making. Take a thoughtful moment to decide whether or not you really need the product.
5. Using credit regularly instead of cash
A very common habit of Americans is the usage of credit cards. Even if there is cash in your pocket, you tend to use card and don’t realize when you crossed limits and spent more than you actually have. The actual usage of credit card should be during emergencies. It’s advisable to use cash to make everyday purchases like groceries, gas, clothes, etc. If you continue using credit cards without giving it a second thought, you might just attain a lot of debt.
6. Not keeping a track of your spendings
Keep a track of your everyday spendings. If you don’t know how much you spend on a daily basis, it’s not possible to understand your expenses. You can’t maintain a balance between your income and expenses if you don’t know your daily purchases. It might result in spending more than you actually earn.
You are actually flushing out money when you are spending without thinking about it. It’s important to calculate the underlying costs of your spending habits. Americans do have a lot of bad financial habits, but a latest research has found out the worst being not saving enough money. To save money, knowing where your earnings go is the most important. However, if you take in consideration these spending habits, life can be a lot easier.