As we settle into the rhythm of the new year, now is an excellent opportunity to consider your financial habits. Some financial decisions are insignificant in the broader plan of things. Ever gone a little over your gas budget because you did some extra traveling throughout the month? It's easy to get back on track from something like that. Others, however, might cause significant harm, potentially costing you thousands. Make 2023 the year you avoid bad money habits and bad financial choices. This post will look at some that have sadly become all too common.
Disregarding Your Debt
You know how kids like to tell their parents, "I can't hear you!" when they're told to do something they don't want to do? If you realize you're in debt but refuse to do anything about it, you're effectively doing the same thing. Don't let this trend continue into 2023. Pretending your debt is not there will not help. Furthermore, denial produces more problems than you began with. It's similar to ignoring indications of disease. Early intervention can help, but delaying treatment may worsen your illness.
Late fees and interest penalties, dealing with collection agencies, and slipping further into debt are all repercussions of an out-of-sight, out-of-mind approach to your debt. It is risky and fosters a pattern of bad behavior that will have long-term consequences.
To begin paying off this debt, you must first determine how much you owe and the interest rate on each account. Create a budget that includes payment strategies for each obligation. Pay your set expenses first, then focus on your debt.
Spending for Convenience
Overspending for the sake of convenience is a typical stumbling block. Getting out of debt is challenging if you're continuously purchasing items like takeout dinners when you can create your own at home for a fraction of the price.
For your lifestyle, a certain level of convenience is occasionally required. However, to reduce debt and increase savings, review your expenditures to identify areas where you may cut back.
Taking control of your spending habits takes time and effort. So don't expect everything to change overnight. There is a period of adjustment. Simply start by examining what you spend on things like fast food, entertainment, apparel, and subscriptions. Then, consider when and how you will reduce spending on these items.
Spending to Lift Your Spirits or Due to Impulse
Are you the sort to buy anything whether it's on sale or not, even if it wasn't planned? Or maybe you were feeling bored and went to the store to get some stuff to fill that void. While an impulsive or mood-boosting purchase now and then is unlikely to have a long-term impact on your money, making it a habit can drastically derail your plans. Create a strategy to assist you in dealing with the urge to spend without reason.
Some popular methods for controlling these behavior patterns include delaying any nonessential buying by at least 48 hours. When the moment's joy wears off, the desire to buy typically fades. Or try asking yourself, "why I am making this purchase" before you pay for the goods. Is it because you require it or because it is marked down?
Maintaining A Certain Image
Have you ever heard the expression "keeping up with the Joneses?" This is referred to as "conspicuous consumption" by psychologists. Anytime you buy things you otherwise wouldn’t to impress someone else or make yourself look more successful, you're living up to this ideology.
While some people are unconcerned by how they compare to others, it may be a significant issue for others. When you see a friend ride up in a brand-new vehicle or a coworker wearing designer clothing, remember you don’t know that person’s financial circumstances. They may have taken out a large loan or charged outrageous amounts on their credit cards for those products, which they will now be repaying for years.
When you're feeling envious in these scenarios, it's a good idea to remind yourself of your objectives and ambitions. Remember that projecting an image to others is not more important than paying off debt. Similarly, investing for retirement so you may live comfortably in the future is far more valuable than any status symbol you might purchase.
Failure to Adhere to a Budget
Following a budget is critical to acquiring savings and staying out of debt. It may be challenging to plan and reflect on every purchase, but budgeting is a tried-and-true money-management method.
If you don't know how to create a budget, now is the time to start. Check out our post Creating A Budget In 5 Easy Steps to learn a simple and effective budget development method.
Keeping a careful eye on your finances and sticking to a budget provides you with a sense of independence. You begin to understand where you might make changes to suit your priorities, and you realize that managing your money allows you to spend more freely on other things.
Neglecting the Future
Do you want to retire? Contemplating purchasing a home? Travel? Will you leave an inheritance to your children? What steps are you taking to make it happen? Unfortunately, it's tough to imagine five, ten, or fifty years ahead when you're just getting by today. However, if you are not actively considering how your present financial actions may impact your future lifestyle, you will likely become trapped in an unforgiving loop.
Even if you're struggling with present financial challenges, keep in mind the long-term goals you want to achieve. Consider where you want to be in a year. Then consider the following three, five, and ten years. It's okay if specific goals appear out of reach. Big ambitions and objectives frequently motivate us to accomplish difficult things like paying off debt. Don't let today's worry overshadow your plans for the future. Keeping those aspirations in mind will help you stay the course when making sensible financial decisions is difficult.
Start Planning Your Future Today
We hope this article has helped bring awareness to some of the most common habits and situations negatively impacting individuals' financial success each year. We also hope that by knowing these things, you will be empowered to avoid them in 2023. However, if you still feel as if you need more assistance in planning for your golden years, we’re here to help.
At Fourth Avenue Financial, our first priority is your overall financial success, no matter what life events come your way. We want to help you develop, implement, and monitor a strategy designed to address your situation to ensure all your investments set you up for a path of financial success. If you are ready to start planning for your financial future, we are here to help. Contact us today at (304) 746 7977 to schedule a meeting with one of our experienced financial advisors or schedule online: https://calendly.com/fourthavenuefinancial/introductory-zoom.
Securities are offered through J.W. Cole Financial, Inc. (JWC), Member FINRA / SIPC. Advisory Services are offered through J.W. Cole Advisors, Inc. (JWCA). Fourth Avenue Financial and JWC/ JWCA are unaffiliated entities.