Many people are in dire straits now due to bad spending habits. Lots of businesses have folded up as a result of bad spending on the part of business owners and entrepreneurs. Bad spending habits have prevented many workers from investing their income, which can fetch them more money and reduce their financial problems.
We believe that this article would go a long way in helping people overcome bad spending habits, which are common among young people.
The Common Bad Spending Habits Are:
1:Not Budgeting:
Budgeting is not just for high-calibre people who lack enough money. It is for everyone who wants to ensure that their money is enough (Rosette Mugidde Wamabbe).
A budget is an instrument to monitor the money that flows into your pocket, what you are spending the money on, and the amount of your expenses.
Lack of budget causes:
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Accumulation of Debts: You would be moved by your impulse to overspend and accumulate more debts.
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Not Preparing for an Emergency: You would not be able to set aside some specified amount of money in case an unexpected event like a job loss or accident occurs.
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Difficulty in Achieving Financial Goals: You would not be able to achieve your set goals since you lack self-discipline in your spending.
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Difficulty in Savings: Overspending would make it difficult to save because there is no mechanism that helps you track your expenses.
2: Emotional Purchases:
Emotional spending is when you are moved by emotions such as happiness, anxiety, sadness, stress, etc. to buy unplanned things.
If you are not careful, you may end up spending all your money on items you don't need under the influence of your irrational acts.
Effective Ways to Overcome Emotional Spending
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Before buying something out of excitement, take some time to breathe and ask yourself the importance of such a product or service.
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Identify what triggers you most to spend irrationally, as doing so would help you put your spending in check.
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Instead of yielding to emotional spending, channel your emotions into other activities like meditating, taking a walk, or talking to therapists.
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In order to avoid the temptation of emotional purchases, it is advisable to stop the habit of always going out with your credit card.
3: Spontaneous Purchasing:
Spontaneous or impulse buying is when you purchase something you have not planned for.
Such spending happens unexpectedly, especially when you come across some products that are too tempting for your eyes.
Signs That You Are Indulging in Spontaneous Purchasing
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When you continue to spend more than you plan for.
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Feelings of regret after buying something you didn't plan for
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When you frequently visit supermarkets or stores that tempt you into buying things you don't plan for.
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Frequently, you return the products you buy after regretting them.
4: Failure to Diversify Your Investments
Diversification is an investment technique whereby you spread your capital among a mix of different investment instruments so as to limit your exposure to risk.
With the current state of the economy, if you are the type to spend your money lavishly without thinking or planning, you would not think of diversifying, and diversification is very important as it makes your finances less vulnerable to economic crises.
5: Using Credit Cards
Using credit cards to make payments regularly is not bad if you are not enslaved by your emotions. You should learn how to use your credit card in a disciplined and wise manner.
Tips to Overcome Bad Credit Card Habits
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Pay the entire balance to avoid charges for minimum payments.
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Avoid cash advances, as they would put more pressure on your finances through massive interest rates.
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Read your Credit Card Statement regularly so as to monitor how you make purchases.
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Stop the habit of buying items you cannot afford, as this would save you from the burden and frustration of debt.
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Don't apply for credit cards you don't need because this would increase your debt profile, and when this happens, your credit card score would be affected.
Early payment of your credit card would save you the cost of late fees and higher interest rates.
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