Most of us have at least one bad habit that
we keep fighting, but we also keep losing to. Some of these bad habits are
completely harmless; however, there are habits that can cause devastating
results.
Some bad money habits negatively impact
your finances which might leave you broke even before you enter retirement.
Learning how to break these bad money
habits can help you get your finances back on track so you don’t end up
depending on your relatives or government programs.
Here are 4 bad money habits that are
keeping you from retiring rich:
Bad Habit #1: Not Making (and Underestimating) a
Budget
A budget is an
amount of fund available for spending, based on a plan for how it will be
spent. It is one of the most basic tools you can use when it comes to managing
your money.
If you don’t track
how much your income is and how much you spend, you’re essentially setting
yourself up for financial disaster.
Making a monthly
budget is simple but often neglected and underestimated. You start by making a
list of all your expenses. Include your fixed expenses like rent or utilities,
and variable expenses, like groceries and gas.
It’s important to
be as thorough as possible to know exactly what you have to pay out. Once you
have the total amount, you’ll know how much you need to put into your budget
and how much you can save.
Tracking your daily
expenses is a great way to get a clear idea of where your money’s going. You
can easily tell if you’re overspending if you’ve got more funds going out than
coming in.
If you’re tired of
being broke, the first step is to cut out the unnecessary expenses and put your
spending under control.
Bad Habit #2: Not Paying Your Debts
Credit cards are
useful tools for building your credit history and earning rewards, however, you
must know how to use them wisely. Keeping a high interest debt and only paying
the minimum each month is like having a flat tire on your way to financial
success.
For example, you
owe $2,500 on a credit card with an annual percentage rate (APR) of 17 percent.
If you only pay the minimum of $50 a month, you’ll need seven years to pay it
off.
Not only that, you’ll
be losing around $2,000 in interest in the process. If you’ve got multiple
cards with big balances, you’ve sentenced yourself to a life in debt unless you
start trying to pay it down.
Bad Habit #3: Not Saving
If you don’t have a
budget and you’re up to your neck on credit card debt, it’s almost certain that
you can’t save any money at all.
If you can’t save,
you’ll be leaning on your credit cards or you’ll have to take out a loan in an
event of a financial emergency. Having saved a budget for at least three to six
months of expenses can go a long way in case you lose your job.
Learning to save
takes time. You need to start seeing that every penny you’re able to put away
counts. Even if you’re only able to save $25 a week, it will add up to $1,300 a
year which can be a significant amount of emergency fund.
Once you get used
to building up an emergency fund, it’s time you start looking at the bigger
picture when it comes to saving.
If you’re not putting
away money for retirement today, you’re only delaying your retirement and
sabotaging your goal to retire rich. You need to make sure you’re building your
nest egg.
Bad Habit #4: Not Buying Long Term Care Insurance
Long term care
insurance (LTCI) is an insurance product that pays for long term care costs of
policyholders that are generally not covered by health insurance, Medicare, or
Medicaid.
Why consider LTCI?
Longtermcare.gov says that, 70% of people aging 65 can expect to rely on some
long-term care related services or support.
Most people do not
think about the cost of care until they need it and it often happens to people
in their retirement. Some people watched as they sold their assets so they can
pay for long term care expenses.
LTCI must be viewed
as a safety net rather than as a financial investment since it has no monetary
return.
There are many ways you could be endangering
yourself financially but these are some of the worst money habits you want to get
rid of. If you’re determined to retire with a significant amount of assets, maybe
it’s time to take control over those bad money habits.
References:
https://smartasset.com/personal-finance/3-bad-money-habits-that-are-keeping-you-broke
