50 habits that are keeping you from saving It’s all too easy to fall into bad money habits, but, over the long term, the consequences can be devastating to your financial health, making it impossible for you to own a home or retire. Here are 50 habits that might be […]
50 habits that are keeping you from saving
It’s all too easy to fall into bad money habits, but, over the long term, the consequences can be devastating to your financial health, making it impossible for you to own a home or retire. Here are 50 habits that might be keeping you from saving—and how to break them.
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Paying the minimum balance
If money is tight, it may be tempting to simply pay the minimum amount on your credit card, but, in the long run, this bad money habit will cost you a fortune in interest. Try to pay more than the minimum every month. If that’s not possible, you may need a debt repayment strategy to break the cycle.
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Using debt to pay off debt
Household debt in the form of home, auto, student, and credit loans is on the rise, now exceeding $13 trillion in the United States. And one of the worst money habits you can adopt is using one form of debt to pay off another. In essence, you’re not paying anything down, “you’re just shuffling your debt around and incurring more debt” through balance transfer transaction fees. The only time you should consider using debt to pay down debt is if you’re transferring a balance from a high-interest rate credit card to a lower-interest rate one—so long as the balance transfer fee doesn’t negate the interest savings.
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Using ATMs outside your network
What’s $2.50 here and $2.50 there, right? Wrong. It might be more convenient to use ATMs outside your bank’s network, but if you do it twice a week, you’re throwing $250 away a year.
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Paying for unused services or memberships
Be careful about signing up for monthly subscriptions and memberships. They may not cost a lot up front, but they do add up, and often go unused. Make a point of assessing whether you’re using what you’re paying for. Are you hitting the gym three times a week? Do you really read those magazines? Are you still watching cable TV? If not, it’s time to cancel.
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Paying late fees
It’s easy to forget to pay your credit card bill on time, but it’s a mistake that’ll cost you. First, you’ll get hit with a late fee—generally between $25 and $38. Then it’ll affect your credit score. And if you’re more than 60 days late, your interest rate could go up to as much as 29.99 per cent. If you’re prone to forgetting, set up an automatic payment plan through your bank.
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Playing the lottery
According to Consumer Reports, your chances of winning the Mega Millions jackpot is 1 in 175,000,000. Why not take what you would spend on lottery tickets and invest it in just about anything? Your chances of turning a profit are much better.
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Buying the latest and greatest
Do you really need the latest smartphone or other nifty new gadgets? Remember, like a new car, it’s not an investment if it depreciates the moment you take it home. Ask yourself a few key questions before buying a new toy: Does your old one still work? If not, can it be repaired? Have you considered last year’s model? What about a refurbished item?
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Buying cheap products
Save now, spend later. This is one bad money habit you’ll want to break. Buying cheap throwaway products will likely cost you more in the long run because they need to constantly be replaced. You don’t necessarily need the Cadillac version, but if you pay a bit more for quality, it will probably last longer.
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Taking out a long-term car loan
According to Forbes, average car loan amounts are getting higher and longer, which means people are staying in debt longer. There are several issues with this, mainly that you end up paying a lot more in interest. You could also end up “under water,” meaning you owe more on your car than it’s worth, which becomes a problem if your financial situation changes.
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Buying bottled water
If you think bottled water is better than tap water, think again. An estimated 25 to 40 per cent of bottled water comes from the tap anyhow—so you’re paying extra for nothing. If you rely exclusively on bottled water to stay hydrated, you could be throwing away more than $1,000 a year.
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Using your credit card to get rewards
Points, miles, rewards—we’re suckers for these gimmicks. Just remember, nothing is free. You’re paying for these perks in the form of higher annual fees or interest rates, rates that skyrocket after the introductory period ends, or rewards that expire or disappear with one missed payment. Focus instead on good money habits, like only using your credit card in an emergency.
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Using your credit card for everyday purchases
Don’t get into the bad money habit of using your credit card to make everyday purchases, like groceries, gas, and clothing. It can give you a false sense of being able to afford more than you really can and you’re likely to pay interest for no reason. Avoid using credit if you have the cash. This will give you a more accurate sense of how much money you have at your disposal.
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Racking up debt
When it comes to bad money habits, debt is top of the pile. It’s a dangerous path to go down because it can be so hard to get out of. Ideally, you shouldn’t buy things you can’t afford. Of course, there are exceptions, like houses, which are simply too expensive to pay for in cash unless you’re a bank robber or movie star. If you do find yourself drowning in debt, try financial guru Dave Ramsey’s snowball method to pay it off.
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Changing your oil too often
Yes, it’s important to change the oil in your car, but you may not need to change it as often as you think. Newer vehicles use synthetic oils that last much longer than the standard 5,000 km (about 3,000 miles). Depending on your vehicle, you could wait up to 24,000 km (about 15,000 miles) before changing your oil and pocket the difference. If you have a newer model, follow its oil life monitoring system rather than set timeframes.
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Relying on payday loans
If you live paycheque to paycheque, short-term payday loans can come in handy if you suddenly find yourself with a bill you can’t pay—like costly car repairs or an unexpected trip to the dentist. The trouble is they come with huge interest rates that, if you’re already living on the financial edge, can push you into a dangerous cycle of debt.
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Ignoring citations
A parking or speeding ticket can ruin your day, but an unpaid ticket can hurt your pocketbook. If you don’t pay them, they go up. If you really let things go, your car can get towed or “booted” and you’ll have to pay to get it back or get the boot off. If you continue to ignore the issue, some cities have the right to seize and auction off your vehicle. You could end up in court, ruin your credit score, or have a debt collection agency after you. The moral of the story? Pay your tickets on time.
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Buying brand-name medications
Generic drugs are often just as safe and effective as their brand-name counterparts, but can cost up to 95 per cent less. When your doctor prescribes medication, be sure to ask if there’s a generic that can do the trick.
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Falling for sales
Sales are a marketing tactic stores use to get you to buy something. According to Consumer Reports, however, retailers often label merchandise as being on sale even though it was never for sale at a higher price. Use an online price-comparison tool to make sure a sale isn’t a scam. But more importantly, make sure you’re buying something because you really need it, not just because it’s on sale.
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Indulging in retail therapy
We’re constantly bombarded with ads, online content, and the media telling us we need to spend money to feel happy, beautiful, important, fulfilled—or that everyone is living a wildly exciting and lavish lifestyle except us—but nothing could be further from the truth. Like a drug, retail therapy can actually damage your health, making you more depressed and angry.
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Sticking with incandescent light bulbs
Incandescent bulbs may be cheaper up front, but energy-efficient bulbs—such as halogen incandescents, compact fluorescent lamps (CFLs), and light-emitting diodes (LEDs)—will save you money down the line. If you replace just five of your home’s most frequently used bulbs with energy-efficient ones, you’ll save $45 a year.
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Living beyond your means
If you spend more than you earn, it’s going to catch up with you. You can borrow from friends or family, use credit, and dip into your savings, but eventually, you’ll run out of options. The key is to live within your means and ideally put a little bit aside each month for the future.
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Shelling out for brand-name groceries
Advertising would like us to believe we need a certain brand, but generic groceries are often just as good, at a fraction of the price. According to Dave Ramsey, generic groceries could save you about $1,000 a year.
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Buying pet insurance
According to Consumer Reports, which compared the cost vs. the payout of nine pet policies for a 10-year-old dog whose lifetime vet bills totalled $7,026, the total premiums would have surpassed the dog’s medical bills in all nine cases. Consumer Reports suggests putting money into your own vet emergency fund instead.
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Leaving everything plugged in
As we increase our connectivity, we increase our power usage. Phantom power (the power drawn by devices when you’re not using them but they’re ready for action) can account for 5 to 10 per cent of your household’s electricity bill. To save money, unplug devices when not in use, use “smart” power bars with timers or master/slave plug sockets so that when you turn off one device, like your TV, it turns off all the connected devices, such as DVD player, video game console, and stereo.
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Saying yes to extended warranties
Extended service plans or warranties for cars, electronic devices, appliances, and other purchases are a money grab. The manufacturer’s warranty is often enough for standard defects and repairs. You’re better off setting aside the money and spending it on the repairs yourself.
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Overindulging in vices
From gambling and smoking to excessive drinking and taking drugs, personal vices are bad for your health and your pocketbook. Set limits for yourself and stick to them. If you can’t, it may be time to get help.
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Giving in to impulse shopping
If impulse shopping is your weakness, you’ll need to apply some strategies to avoid wasting all your money at the mall—whether brick-and-mortar or virtual. Leave your wallet at home, impose a strict waiting period before making a purchase, or keep your credit card in a glass of water in the freezer.
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Not keeping (and following) a budget
Keeping and following a budget should be the cornerstone of your financial plan. If you don’t track your cash flow, how can you expect to be in the black? Use an app like Mint and get started today.
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Paying for dry cleaning
Few items truly need to be dry-cleaned in this day and age. Instead, wash delicate items by hand and hang them to dry, choose wrinkle-free clothing, or buy a device, like the Whirlpool Fabric Freshener, that will give you that “fresh from the cleaners” feel, but without the hefty price tag.
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Relying on convenience
Convenience comes at a cost. Getting your groceries delivered, grabbing snacks on the go, driving to work (instead of taking public transit)—all these small conveniences can add up to a more expensive lifestyle. Often it boils down to time management—one less TV episode means more time to get things done and avoid the convenience trap.
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Going out for lunch every day
Going out for lunch every day can add up fast. Make a lunch meal plan and stick to it. As a reward, treat yourself to the occasional lunch out.
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Grabbing coffee on the go
Like going out for lunch, grabbing coffee to go every morning can hamper your ability to save, especially when you opt for a fancy frothy beverage. It doesn’t take long to make your own at home and pour it into a reusable mug—plus it’s better for the environment!
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Putting off saving for retirement
Depending on your age, retirement might seem light-years away, but when it comes to retirement saving, the sooner, the better. The sooner you start, the smaller the percentage you have to put aside so you can live the retirement lifestyle you would like.
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Only saving what’s left over
If you only save what’s left over at the end of the month, you might find there’s never anything left. A good strategy is to pay yourself first. If you can, set aside 10 per cent of your gross earnings each month and budget the rest of your expenses as if that money didn’t exist.
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Going without insurance
Yes, insurance costs money, but certain types of coverage—such as home, car, and medical—are a worthwhile expense. In the United States, for instance, medical bills were the biggest cause of bankruptcy. Get coverage so you’re not part of that statistic.
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Waiting to invest
Like saving for retirement, you’ll want time on your side when it comes to investing so you can earn compound interest. You don’t have to be a day trader to invest—pick something simple and safe and let it grow over the years.
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Not having an emergency fund
Having an emergency fund can bring you more than just peace of mind. If you lose your job, get sick or injured, or your car breaks down, and you’re not prepared, it can send you into a vicious cycle of debt. But if you’ve saved up enough money to cover your living expenses for six months, you can weather the storm.
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Not having savings goals
If you don’t have a concrete goal, it’s unlikely you’ll achieve your objectives—that goes for everything from losing weight to saving money. First, set a financial goal for yourself, such as saving up for a down payment on a home or your kids’ education. Next, determine how much you need to save and set a realistic timeline. Then set up recurring automatic transfers into a dedicated fund. If you don’t earn enough to do this, consider taking on a side gig—like Uber driving or dog walking—and put all the money you earn from it into your fund.
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Not having a financial plan
Savings goals are for specific objectives and a budget is to keep you on track in your day-to-day, but you also need an overarching financial plan to focus on the big picture. This will include things like saving and investing, paying down debt, insurance, retirement planning, estate planning, and taxes.
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Buying everything new
Things are only new for a minute, then they’re used. From cars and clothes to furniture and exercise gear, you can find almost everything on Craigslist or at thrift stores and garage sales. There are also libraries—not just for books—but also for things like kids’ toys and tools that you can use to save cash.
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Paying others to do the work for you
Life can be hectic, and you probably need to pay someone to help balance the workload for major things like child care. But don’t get carried away. From dog walkers and home cleaners to snow removal services and lawn care, you can end up spending all your money on other people. Can you take on some of these chores yourself or let some of them go? The lawn doesn’t have to be perfect.
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Owning your own car
Owning your own car is a big expense you might be able to forgo. Public transit, ride sharing, and car sharing are all good options that can save you, not just the expense of buying a vehicle, but also the rising costs of gas, insurance, and maintenance.
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Living alone
While many prefer to live solo, it comes with a high price tag, especially in big cities, where the cost of housing has skyrocketed. If you live alone but want to save more money, the obvious answer is to get a roommate, but for many, that’s not an attractive option. Some creative possibilities include turning your basement into a rental suite, Airbnbing your place when you go on vacation, renting out a room to a student on a short-term basis, or putting a tiny home in the back.
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Not opting for accelerated mortgage payments
Accelerated mortgage payments are an easy way to sneak in an extra payment without feeling a big hit. Depending on your lending institution, you can make weekly or biweekly payments (versus monthly), saving you interest in the long run.
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Not making lump-sum payments
Another way to save interest and shave years off your mortgage is to make annual lump-sum payments. Again, depending on your lender, you can put up to a certain amount against the principal, usually at specific times such as the end of the mortgage term or year.
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Giving in to the kids
Begging, pouting, throwing a tantrum, plying you with their big eyes—kids know how to work it to get what they want. Your job as the adult is to not give in, both for your finances and for their financial education.
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Not asking for a raise
If you do good work and you’re dedicated to your job, at a certain point, it’s time to ask for a raise or a promotion. It may be scary, but it’s a necessary step to take to ensure your financial well-being over the long term.
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Not seeking upward mobility
Many people are unable to save because they simply do not make enough money. If you’re stuck in a dead-end job, it’s time to do some soul searching. You may need to upgrade your skills or qualifications or change careers entirely to secure a higher-paying position that will make it easier for you to achieve your financial goals.
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Spending your retirement savings
Dipping into your retirement savings is a big no-no. Not only will you be penalized with fees, but you’re jeopardizing your financial future. The same goes for your emergency fund—it’s only for emergencies. It’s not mad money. Keep it in a fund that’s slightly out of reach—one that takes several days to transfer out of and offers a higher interest rate.
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Remortgaging your home to pay debts
The idea of using the equity in your home as a piggy bank may be tempting, but is it a good idea? There are several pitfalls with this concept. First, mortgage rates are on the rise again, so the math may not be in your favour for long. Second, if you clear your short-term debts by refinancing your home, you may fall back into your bad habits and rack up your credit cards again, putting yourself deeper in debt.
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