Like so many, I promised to build healthy habits around savings this year. That is until I realised I needed to take a step back and think about my overall money habits first.
Reports suggest that our spending habits have changed over the pandemic, so a refresher course is needed on how to break bad money habits before we can even start thinking about building a savings habit.
Bad Habit One – Using Card Over Cash
With the pandemic came a strong switch to cards only being used in many stores. Understandably, the reason is to prevent contact and the potential spread of disease. However, using a credit or debit card over cash can lead to major problems such as credit card debt, overdraft fees, and the overall mismanagement of how much money we have available to us.
How To Break It
We may be tempted to grab the scissors and ditch the card. But in reality, this doesn’t help us create a habit when it comes to using cards which can be helpful at times. Instead, create a strict limit on your spending and when and where you are allowed to use a credit card.
Bad Habit Two – Not Spending Wisely
Considering sales tax VAT rose by almost a quarter in 2021 compared to 2020, we are certainly not restricting our spending throughout the pandemic. But are we spending wisely? Spending is not a bad thing but when it comes to habit-forming, we need to look at whether or not our spending is necessary and if it is taking away from something more important - such as paying the bills.
How To Break It
Pause before purchasing. Ask yourself, do I really want it, need it, and can I afford it?
Bad Habit Three – Not Having A Budget
Our spending can very easily spiral, but we need to have control over our finances. Not having a budget is a surefire way to fall into debt.
How To Break It
Do the math and create a household budget. This way, we can keep our expenses and income in balance by monitoring how much is going out compared to how much comes in. Be sure to include short-term and long-term financial goals.
Bad Habit Four – Not Having A Rainy Day Fund
Setting aside an emergency fund for those unexpected purchases or household issues is one of the most grown-up things we can do with our finances. Big expenses such as when the washing machine no longer spins, or the cooker packs it in can have a big effect on our savings and our monthly household budget. We then need to figure out how we’re going to pay for these unforeseen expenses.
How To Break It
A rainy day fund is that untouchable small savings nest that is set aside for nasty surprises. The hardest part of this habit is building up the funds in the first place. Set a figure that is suitable for your family and ensure whenever it is dipped into for emergencies, it is rebuilt as soon as possible.
