Spending habits are ways you choose to spend your money, whether planned for in a budget or not.
These money behaviors are sometimes just there to make you feel happy or have some form of gratification without necessarily knowing the impact they have on your finances.
How you behave and your choices around money will always determine your financial success.
Spending habits that are well thought out will boost your financial success, while the opposite will actually derail it.
Spending might prove difficult to tame due to the emotional complexity that varies across individuals.
Whereas how you choose to spend your money might seem to make sense to you, some guy somewhere may be wondering what has gotten into you because it doesn’t make sense to him.
Every decision people make with money is justified by taking the information they have at the moment and plugging it into their unique mental model of how the world works
(Source: The psychology of Money, Morgan Housel)
To have a good spending habit, there are some basic rules of spending you may find useful.
Budget Rules for Your Spending
The 50/30/20 rule, created by Senator Elizabeth Warren and her daughter, will help you distribute your after-tax monthly income across your spending.
Here, 50% goes to your needs, i.e., housing, food, utility bills, transport, etc.; 30% goes to wants; and 20% goes to savings.
Having this in place can help you know where your money is going.
While some experts argue that the rule is no longer realistic due to the high cost of living and wage stagnation, they have proposed other methods as alternatives so as to fit the current economic situation.
They include; the envelop method, 80/20 rule, 70/20/10 rule and zero -based budgeting.
The above may apply to those who are keen in advancing in their financial journey.
In this article we shall be looking at the money behavior mistakes that could derail our financial success and their applicable solutions.
But Firstly,
Biblical view on spending habits
Luke 16/10-11
“Whoever can be trusted with very little can also be trusted with very much, and whoever is dishonest with very little will also be dishonest with much.so if you have not been trustworthy in handling worldly wealth, who will trust you with true riches?”
As money stewards, God are calling on us to manage money well .our choice of spending should be guided by priority and gratification.
You have to get away with spending habits that do not add value to your money inform of growing your earnings.
Spending Habits That Could Derail Your Financial Success And How To Correct Them
1) Living Beyond Your Means.
You can never grow financially when you spend more than you earn. You will always be thinking of debt.
With many money apps in the market today, you are at liberty to borrow and do whatever you want. Borrowing for personal use will not only make you a slave of debt but also delay your financial goals.
Remember you just don’t afford if you can’t pay in cash.
Having a budget plan in place can help you overcome this challenge.
But you should know that putting your income, expenses and savings in details is one thing and sticking to it is another thing. You have to do both to reap the benefit.
2) Not Diversifying Your Investments.
Putting all your eggs in one basket e.g. buying stock with all your money in one company exposes you to more risk of losing everything.
You should consider different investment products such as mutual funds, trusts and treasury bills and bonds such that when one fails you have another one to support you.
3) Focusing More On Rates of Return Other Than Your Goal
When you dwell much on rates of return other than identifying the goals you lose the focus.
Your goal should be the key component on your financial plan.
You can always identify and implement whatever that you think can give you much returns now for the goal you’ve set.
Seek financial advice from experts on different investment products that align with your goals.
4) Saving on Costs as a spending habit
Let’s just say cheap is expensive‼
Running away from costs of services like advice from experts, taxes may make you lose even much money if anything goes wrong.
You may view it as unnecessary cost but think again if you are indeed serious with your investment.
Buildings worth millions have collapsed because the cheap fundi had zero knowledge on site topography or the standard of materials used.
5) Going by The Masses
This makes you put money into use that you had not planned for just because you want be counted among others.
It’s always good to use money in ways that are unique to your financial situation. It’s you who understands you.
6) Speculating and Gambling
Waiting to see upward trends in market forecasts based on annual earnings reports and political waves will make your money stay idle thus no earnings.
While you may be made to believe this will work to your advantage, on the contrary it may not.
You need to start investing early so as to get maximum returns over a period of time.
Stop gambling it can make you develop an addiction and you end up losing all your money.
7) Setting Unrealistic Goals for Your Spending Habits
These are goals that are set when you don’t understand what it takes to achieve it.
Often, you will get disappointed, feel defeated and even quit.
You cannot put up a shop today and expect to make profits from it overnight.
Set your goals based on your potential and financial ability to see it succeed.
You can always share your expectations with financial experts.
8) Putting Your Money in Pyramid Schemes
These get -rich -quick schemes keep fooling investors by a promise of offering high returns on their investment over short time.
Making a fortune over a short period of time, being used to recruit new members and testimonies from existing members should be a red flag.
Pyramid schemes come inform of cryptocurrencies, multi-level marketing schemes and even real estates.
Your earnings only benefit people at the top of the pyramid i.e. owners and managers. You at the bottom are always left with loses.
Avoid falling into the trap. They are scammers waiting to wreak havoc on your hard earned cash.
There is nothing like free money or quick money. Wealth takes time to build.
9)Having Spending Habits Based on Your Emotional Decisions
Spending money just to prove you to people may not only affect you emotional but also in setting financial goals.
Emotional decisions can make you to hurriedly invest in something that you do not have much understanding on what it takes to be realized.
To avoid this control your emotions as opposed to letting them control you and avoid rush hours.
Take time to understand what you risk.
10) Having Paycheck as Your Only Source of Income
Depending on one source of income can be tricky especially with the current economic situations.
Picture a tank with one inlet and several taps as outlets, that tank can never fill.
Find money making opportunities in-order to boost your income.
You can start a business as your side hustle all you need is that entrepreneurial spirit.
11) Not Paying Yourself First
This happens when you don’t set aside something for yourself and wait for what is left.
To sort this out, treat yourself as your number one bill i.e. after taxes and tithe (for believers).
Make this a habit every time you earn so that you don’t divert your savings on personal issues.
12) You Don’t Have An Emergency Fund
The purpose of emergency fund is to put money for the unexpected,
When you don’t set aside some money you will either take your savings or borrow to sort yourself out.
It’s advised that you put up to 3-6 month worth of expenses set aside in account that is different from your savings account.
13) Walking Your Financial Journey Without Involving Your Spouse/Family
You will experience burn out if you walk this journey on your own.
Just like keeping other things to yourself may be stressful so is the same with finances especially in a family setup.
To easily achieve your financial goals, talk to your spouse/children so that you are on the same page.
Working as a team not only releases you of some money struggles but also offers moral support.
14) Not Taking Care of Your Health
Excessive consumption of alcohol, smoking, not having enough sleep, lack of regular exercise and unbalanced diet can lead to illness.
This potentially increases the financial burden not only to yourself but also to those around you since they have to meet the cost of treatment.
To enhance your personal finance development, it’s good you take care of your physical, mental and spiritual being.
Conclusion;Have Well Thought Spending Habits To Succeed in Your Financial Journey.
“But money is only a tool.it will take you wherever you wish, but it will not replace you as the driver.it will give you the means for the satisfaction of your desires, but it will not provide you with desires.”-Any Rand,Atlas Shrugged
Spending habits are choices we make in managing our money.
The Choice you make can either boost or derail your financial success.
You have to delay gratification in order to achieve your financial goals.
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