So we all spend our money differently. The majority of us have only so much money coming in every month, especially the people who have jobs (myself included). As for entrepreneurs, some months can be really great with money coming in and some other months could be unpredictable and difficult. But, no matter how much money you have coming in every month, it comes down to habits and what exactly you’re doing with the money you earn. Here below, I want to discuss five habits that you need to eliminate from your life right now when it comes to money.
1.) Not Paying Your Credit Card
It drives me crazy when I hear people say, “Well I just got this credit card and it has zero percent interest for the first year, so I’m not going to pay it off right now.” Think what you want about credit cards, but I always tell people if you can’t afford it with cash in your checking account, then don’t buy it. I have absolutely nothing against credit cards, and I encourage people to use them more often. But, pay them in full every month so you’re not getting charged interest. Credit card companies offer awesome rewards that enable you to accumulate points. But, just make sure you can afford whatever it is that you’re buying.
2.) Keeping Up With The Joneses
Yes, avoid keeping up with the Joneses. Listen, you know you do it. I don’t have to tell you. People know in their mind they’re buying something to impress someone they probably don’t care about. It’s a trap and unfortunately many people fall victim to it their entire life. Invest your money in assets, and into the things that make you happy. Try to avoid unnecessary purchases at all costs.
3.) Not Having A Budget In Place
Everyone has their own system when it comes to budgeting. Whatever works for you, do it and stick to it! You should know how much money is coming in every month, how much money you want to save (put towards investments, retirement, etc.), what will be spent on food, etc. There are many apps out there that track spending. I personally don’t use any of these, but I have tried some of them out in the past. Everyone is different, just see what works for you.
4.) Not Having An Emergency Fund
You need an emergency fund. People are currently losing their jobs from the coronavirus. It’s terrible and saddens me to write this, but I don’t know if all these people are prepared financially. What if someone had all their money invested in the market and had absolutely no cash on them in a savings account. The market hasn’t been performing well as most of you know, but it will eventually come back up. But, now’s the time you need an emergency fund. You should have at least 6–9 months worth of expenses saved up in a savings account earning interest. Times like these are when you’re thanking yourself for having cash in a savings account.
5.) Not Saving For Retirement
The earlier you start saving for retirement, the better. Listen, none of us know when we’re going to die, but wouldn’t it be nice to have a few million dollars in a retirement account when you turn 60–65 or maybe even earlier for those of you in the FIRE movement. Don’t avoid living your life now in the present, but don’t avoid putting off saving for retirement either. Anything is something, and it’s better than nothing. The power of compound interest really comes into effect. Taking advantage of a 401K with your employer is a must. They are handing you free money, take advantage of it!!