Everyone wants to have a pool of money that they can use at their disposal, without having to think twice about spending. This goal can often become a way that people spend without having achieved that “goal”. This way of living leads to bad spending habits, which could create debt, propel you further into it, or simply leave you broke. However, accumulating wealth and using it wisely is under your control.
These are some of the bad spending habits that could be leaving you broke and how to change them:
Spending everything you earn- So you've just received your salary and already know what you're going to be spending it on. Without proper financial planning it is easy to find yourself living paycheck to paycheck. Just because the money is in your account, it doesn't mean you have to spend it on the latest shoes or a holiday, if it means instability in your finances later on. Make sure that your decisions are aligned to your future financial needs and avoid instant gratification with your spending.
Not knowing where your money goes- the above is often caused by not knowing what you're spending on. The best way to prevent this is to have a budget, but to do it right you must track your spending. You might not remember all the direct-debits from your account, so it is a good idea to take note and to then record what else you spend money on as you spend. It’s as simple as writing it down and adding it up to not go over your proposed budget.
You're constantly behind- Are you on top of your monthly bills? Have any direct-debits defaulted? How good are you at paying back your credit card? All of these payments can put you into debt and have the ability to lower your credit score, which will affect your ability to borrow money in the future. Make sure you are aware of what needs to be paid every month and to pay it, or set up a payment plan if you are unable to. Educate yourself on interest rates to avoid paying more in the long-run.
Lack of an emergency fund- you should prepare for unplanned and unexpected expenses. This serves as a safety net that could stop you from being financially unstable should an unknown arise. It is essential in scenarios like losing your job, to maintain your lifestyle as you look for a new one, or even if an unfortunate accident occurs and there are medical bills to cover, or a storm ruins the structure of your house. An emergency fund could help to keep you out of debt.
Not investing in yourself- it is important to save money instead of buying “things”. One way to ensure that you save, is to pay yourself first. You can put a portion of each paycheck aside into savings and then use this money for investments that will help to grow your wealth. Investments could be in your personal growth, such as upskilling to earn more or by investing in accounts that accumulate over time.
We have mentioned some of the bad spending habits that we see a lot of clients at experiencing. The way to change them to ensure that you are creating wealth and not losing it, is through education. At Standard Bank, we have a wealth of information to help you with your finances so that you don't end up broke. With a little bit of patience, smart habits and the right mentality can build that fortune and be closer to living financially stress free.