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When you think about your finances, do you get a sinking feeling in your stomach? If the answer is yes, then I bet there are money habits that are holding you back.
Since I was a teenager and read “7 Habits of Highly Effective Teens”, I have found the topic of habits fascinating, and it is SO important to the work I do supporting people in their financial journeys. It’s no wonder that my summer reading list features MANY books about the power of habits.
A habit is a repetitive behaviour that you do without even being aware of it. There are awesome habits, like daily exercise, healthy eating, weekly date nights or practicing gratitude. There are also bad habits, like emotional eating, shopping out of boredom, or smoking. The good news is the human brain is as flexible as a Cirque gymnast, and it is possible to retrain yourself OUT of bad habits and INTO good ones!
Today we are going to look at some of the money habits that might be holding you back. Changing even one of these bad habits could be the key to financial freedom – are you ready? Let’s dig in!
Habit #1. You are still using credit cards.
Credit cards are easy. They allow you to buy things that you want RIGHT NOW. I get it! For years, I spent more money than I had each month and carried a balance on my credit cards, all in the name of buying the things I wanted, right when I wanted them.
What a mistake I was making! I believe, whole-heartedly, in living in the present. But don’t think I haven’t had painful pangs of regret, letting myself think about where we COULD be financially if we hadn’t spent so many years digging a pit of debt!
But – back to the present, and YOUR finances. You can’t build wealth and win with money if you are in debt. And you can’t get out debt if you keep using your credit cards!
Chop them up, pay them off, break the cycle.
Habit #2. You are not using a budget.
I never, in a million years, would have guessed that I’d be the person preaching from the rooftops about the beauty of budgets. But I want you to get out of debt, and I know the secret. The number one, most powerful tool at your disposal for achieving your wildest dreams (and enjoying your daily life), is your budget!
If you are letting cash flow in and out of your account without paying attention to how much or how little you have, you will be hard-pressed to make your dreams a reality.
You need to set up a budget. Every.Single.Month. And not just a list of things you will spend money on. A plan for your money that you will update throughout the month with your spending, to make sure you are on track!
Habit #3. You are doing what you have always done.
I can’t tell you the number of times someone has said to me “Oh man, I really want to get control of my money!” and then the next week they are headed on a last-minute vacation, or they bought a new car, or they went out for dinner three times last week.
Albert Einstein famously said, “the definition of insanity is doing the same thing over and over again and expecting different results.”
If you want something new in your life, you’re going to have to do something new! If your goal is financial freedom (and I sincerely hope it is), you’re going to have to spend less money, pay off your debt, and start saving for the future you want!
Habit #4. You are comparing your life to other peoples.
Facebook. Instagram. Snapchat. Whatever your social-media-poison, I’d imagine that you see snapshots from the lives of the people you follow, and you wish your life were as perfectly-curated, or well-traveled, or happily-ever-aftered.
Comparison is a tricky habit to break. We have a whole post all about how to find gratitude for your own life and quit ‘keeping up with the Joneses’ .
But let me say again, you will not positively change your finances when you spend money trying to impress or keep up with other people. Focus on you.
Habit #5. You are not tracking your spending.
If you are spending money without tracking it in some way, you have no idea where your money is going.
Tracking your money goes hand in hand with building your budget. You create a budget, and then you track every single dollar you spend to make sure you are STICKING to your budget.
I track my spending every day. By doing it daily, it doesn’t get overwhelming. Using online banking, I take five minutes each day to put all my spending into EveryDollar. It lets me see where my different budget categories are at and keeps me focused on my goals.
Habit #6. You are contributing to your retirement or savings even though you are in debt.
This one is tricky, and I know sometimes it isn’t a choice. For me, my pension comes off my paycheque, and I have no control over that. But with Dan’s job, we can control how much (or how little) we contribute each month. For many years, we were maxing out his employer match. It seemed so silly to say no to a 20% match, but seriously? We were SCRAPING by, paying hundreds of dollars each month of interest on our debts, and racking up more debt when things got too tight. So were we actually winning?
It was a tough decision to turn off retirement contributions (and thus, the employer match), but we agreed that it would make a huge difference as we paid off our debt. And it did! We paid off over $65000 in 13 months, in large part because we freed up that income that we’d been putting into RRSPs.
Don’t get me wrong. Investing for retirement is INCREDIBLY IMPORTANT. You need to prepare for a blissful post-9-to-5 life. But man, if we had kept contributing each month we would still be in debt, still be paying interest, still be struggling through each month.
Now that we are debt free, we have turned those contributions back on, so we know that we will be ready to retire when the time comes. (Hopefully sooner than later!)
Same goes for savings. Tuck away your one thousand dollar emergency fund and then use any other extra cash you have to get rid of your debt. Once you are debt-free, set some savings goals and go for it! But until then, focus on ONE goal at a time.
Habit #7. You are not making a meal plan.
If you find it hard to stay on track with your budget at the grocery store, you are not alone. It seems like everyone I talk to has a tough time cutting food costs or not blowing the budget on groceries!
There are tons of ways to help save money in this area, but the one that has had the biggest impact on my bottom line each month is meal planning.
Deciding, once a week, what meals we will eat, shopping specifically for the ingredients that I need, and not making daily grocery runs, literally saves me hundreds of dollars each month. I have easily halved my food budget, not to mention reduced my stress each night trying to figure out what to cook.
Habit #8. You are buying coffee or lunch every day.
If you aren’t using a meal plan and grabbing groceries intentionally, there’s a good chance you are falling into this habit too. Hitting the drive-thru on your way to work, heading out for lunch with the girls every day for lunch, or picking up dinner on your way home.
Your money is disappearing.
Not only is this lifestyle expensive, but it is typically not very healthy either. I quit drinking fancy coffee a few years ago when we were doing Weight Watchers – even a regular coffee was way more points than I was willing to use. Making coffee at home is easy and it’s cheap. A whole pot costs less than one cup!
Same for takeout. Filling our family with meals that are nutritious and delicious, and also COST a fraction of the price of take out – there’s NO losing here!
Habit #9. You think it’s okay to borrow money.
I’m not talking credit cards. Well, yeah, I am, but this is bigger than that. To take charge of your life financially, you need to quit borrowing money. From your mom. Or your friends. Or the bank. You need to set a goal and SAVE for a new car, or a new couch, or your groceries.
When you owe money to other people, your income is not yours. I hated every single day that we would get paid, money would come in, and then I’d have to turn around and pay my debts.
Commit to yourself, to your family, right now – I will not borrow money anymore. If I can’t afford it, I won’t buy it. I will make my bills the top priority, in front of indulgences and fun.
Full disclosure – I’m having a difficult time writing and publishing this post because it feels so negative. I don’t want to point out all the things you are doing wrong. I want to celebrate the things you are doing right.
However, I also know from personal experience that sometimes you need someone to point out the things you are doing that are holding you back from the success you are reaching for.
So if any of these rang true for you, own it.
And then CHANGE IT!
Quit your credit cards.
Start a budget.
Track your spending.
Start some good habits today – you’ve got this!
Don’t forget to share this post on Social – you never know who might be making these same mistakes and need a little pep talk to get moving in the right direction!