Once upon a time, in a land far, far away, I picked up some rather nasty financial habits. Okay, in reality my once upon a time was honestly just about two years ago, and it wasn't far, far away by any stretch of the imagination; but you have to start somewhere, right? Over the last couple of years, I disciplined myself to clean up my financial act by pinpointing three massively bad financial habits I needed to boot, and once I did, I kicked those nasty buggers straight to the curb…for good. If you are like I once was, and you find yourself with more month than money on a recurring basis, I'd be willing to be dollars to donuts that we share these same (and most common) bad spending habits.
Bad Habit #1: Not Keeping a Register
I know what you are thinking. You are thinking, "Why do I need to keep a spending record when I can just log on and see how much money I have each morning via my online bank account? After all, they update it daily." While that is a sensible move on its own, it's not quite the most fiscally responsible one. Check registers help you in several ways. Here are some examples of how:
- They help you balance your finances (so know how much you have at all times). This is important because not all merchants send transactions the moment your card is swiped, and checks can sometimes take several days to clear -- if you still use checks.
- They help you locate and manage mistakes you make, and mistakes merchants make (we are only human after all).
- Check registers help you avoid overdraft and bounced check fees.
- They help you catch identity thieves before their spending gets out of control because they make daily money management a daily ritual.
Nowadays I keep two check registers via a free online portal. I have one for my debit card/checking account and a separate register for my credit card. Knowing how much I have left in my account (or as a credit limit) helps keep me from overspending and prevents costly errors, such as not noticing my dentist took a full week to processes my last payment -- something I wouldn't know if I didn't maintain a register, and something that might cause me to bounce another transaction, albeit unintentionally.
Bad Habit #2: Not Having a Budget
I liken living life sans a budget to being a trapeze artist without a net. It's just not smart money. When I didn't have a budget, I had no way to evaluate what I was spending and where I was spending it; I had no idea where I could improve. When I committed to quitting my bad spending habits for good, I found Mint.com. Today, I have a customized budget and set of financial goals I am motivated to stick to. It really is simple math: Once I found out where I needed improvement, improvement came easy.
Bad Habit #3: Not Monitoring a Budget
Even when I was a fledgling budgeter, and was starting on the path to replacing my bad habits with good habits, I was still missing a step: I wasn't monitoring my spending. Now I do. Mint.com automatically emails me whenever I go over a specific budgetary allocation instantly. I know when to stop spending, and I know right away when I need to make an immediate course correction with my money. This helps keep me from falling back into those bad spending habits that were once so common in my life.
Break Bad Habits to Build Good Habits
As I began to break my bad spending habits, I was simultaneously building good habits in their place. And while this three-piece-set of money advice sounds completely simple and effortless, all I can say is that most good advice usually is, and that is definitely harder than it sounds.
What are some bad spending habits you've kicked, and how did you do it?
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