If you thought a lot of money could pave your path to prosperity and wealth, it’s not entirely true. Good habits and discipline are what make a person wealthy. Bad financial habits such as overspending have the potential to not just ruin your present but your future as well. So, get rid of those bad habits as soon as you can.
Here are a few commonly noticed bad habits that needs to be changed right away:
Not Having A Budget
When you don’t allocate money for investments and savings at the beginning of the month, you run the risk of spending your entire income. You can impulsively spend all your money on things that strike your fancy. But if you have a budget in place, you know how much you have earned, how much you need to spend, and what amount you need to save and invest. Being aware of your “budgetary responsibilities”, you start exercising caution with your spending.
Wayward Credit Use
If you have been reaching out for that Credit Card to fuel your daily expenses or use it to purchase things that are not essential, you are probably spending beyond your means and harming your financial health. Credit Card use is akin to taking a loan, so make sure you take these loans only when absolutely necessary. This will ensure you spend within your means.
Delay In Loan Repayments
Some borrowers don’t make timely repayments on Credit Cards and loans, not realizing how this could reduce their potential to take a loan in future. Repeated delays in repayment brings down your Credit Score, something every lender becomes aware of when you approach them for a new loan. Therefore, always repay your debts on time. A credit score of 750 or above is considered desirable by most lenders. Are you aware of what your Credit Score is? If not, you can find out using this free Credit Score report generator.
Not Having An Emergency Fund
People don’t think of bad days when everything is going well. However, unfavourable circumstances such as a sudden illness or job loss come unannounced and are capable of affecting your financial health if you are not prepared for a fight. You must put aside a part of your income every month to create an emergency fund worth six to eight months of your daily expense, so that your bills don’t go unpaid.
Confusing Insurance With Investment
Both insurance and investment instruments are crucial to your financial portfolio. They serve different purposes and should not be used interchangeably. While a health cover is meant to take care of your expenses during illness, Life Insurance is meant to support your dependents in your absence. An investment instrument on the other hand is meant for building wealth. Mixing these tools could mean making them less effective.
You must introspect and identify your weaknesses and make amends at the earliest to set your financial life on the right track.