Repair Your Bad Money Habits and You'll Have a Less Stressful Life
Habits that cause us to waste money without you realizing it.
We all make mistakes, especially when we don't know it.
When I was in college my learned inability to handle money was my biggest weakness that everyone saw in me.
As a child, I always had everything I wanted, but my parents didn't teach me about how money can be medicine and poison at the same time. They spent their money until they ran out and had no financial safety net.
You would think I would have learned from their mistakes, but I spent my entire adult life making bad decisions after bad decisions, even at times when I was living paycheck to paycheck monthly.
I still remember 2019 when I made six figures before I was suddenly laid off from a job I had held for less than a year.
I had decent severance pay, unemployment insurance, and an occasional independent income, but I had to pay my rent, not to mention the rapidly accumulating bills and loan payments.
And this is perhaps the worst part: before I lost my job, I had about $28,000 in my retirement account.
In a particularly weak moment, when my checking account seemed shockingly empty, I withdrew about $15,000 from it. I opted for a direct tax deduction, but have to pay tax on the amount when I file my tax return.
The whole situation made me worried and embarrassed.
Lessons learned as a fighter with bad money habits
At the center of my financial troubles, I found a simple solution: some days are easier than others. Living well without money being a drama is about outsourcing some expenses.
And one of the biggest challenges is simply earning enough to meet your current needs while saving for the future.
You could do this with your relatively well-paying job. So there is good reason to believe that you will continue to find a relatively well-paying job in the future.
Which led me to see money as a commandment. I have established some rules.
Rule #1: Feelings are followed by actions.
So make a commitment to take time for your personal finances just as you take time for your partner.
By doing so, you will feel better about your day-to-day finances. This is the simplest action you can take to improve your financial life today, and your motivation will only increase over time.
In the first week, you sort through all your accounts and save the passwords in a password manager. In the second week, you browse through your accounts and check your transactions. In the third week, you may cancel some subscriptions or cut expenses and look for new ways to manage your spending. Over time, you will find it easier to stick to the commitment and tackle the things you used to dread and avoid.
Rule #2: Take responsibility for your financial situation, regardless of how you got to that position.
It's a shame that my parents didn't give me an ideal example of how to take finances more seriously. I certainly wasn't the only person who had a bad experience with money.
If you want to change your financial situation, you must first take responsibility for your situation, regardless of how you got there.
Taking responsibility is not about being ashamed, feeling guilty, or admitting guilt - it is about taking back your power.
When you take responsibility, you have more power over your life. Taking responsibility for your existential problems is the first step to solving them.
Rule #3: Create a spending plan based on your current financial reality.
I believe that if you don't adapt your spending habits to your current financial situation, you will probably accumulate credit debts that will put you in an even worse financial situation.
Unpaid bills and loan debts can add up quickly, and because of the high-interest costs - which can accelerate the growth of your debt - the consequences of such debt have the potential to affect your life for years to come.
I know you definitely want to avoid this.
Remember that mindfulness is not all or nothing. It's all about doing your best, and that can vary from day to day and week to week.
Rule #4: See money as a game.
When you don't understand the rules of the game you lose.
When you needed money you had to turn to your pension plan. Now that you have done that, you see the consequences of that decision.
Not only do you have to worry about taxes and fines, but you have also undone all the progress toward retirement and are missing out on investment returns.
I don't want to rub salt in the wound, I just want to use a practical example to show the importance of an emergency fund.
Rule #5: Stop wasting money. Distinguish between necessary and unnecessary expenses.
When you prioritize essential expenses, you are free to spend whatever money you have left over.
Discerning your non-essential expenses is like putting bumpers on a bowling alley to ensure you stay on track.
Rule #6: Try to be more financially mindful.
When you are in a financially unstable state, you feel the effects of economic and financial shocks more than when you are less vulnerable. There is no guarantee that adversity will spare anyone, so it is important to work on being resilient.
The best way to do this is to have an emergency fund and a healthy savings and investment rate.
Saving is the only action you can take to solve many problems. If you can't afford 40% immediately, start with what you can afford and work up to 40%.
Rule #7: Analyze your beliefs and feelings about money.
You know that you can find ways to reduce your non-essential expenses, and knowing this is half the battle. Take the time to first understand the source of the problem and understand once and for all why you are struggling with your spending.
If you examine your relationship with money and especially with shopping, many paths lead to the same result.
It's about developing a curiosity to learn more about yourself and asking questions about money and shopping.
Rule #8 Focus on what is most important.
Parts of your financial base are shaky, but once you take the time and care to solidify them, you will understand how small changes lead to big changes.
This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.