Like all behaviors, those associated with finances are learned. Your attitude about money is first shaped by the people who raised you and later influenced by your peers and those you admire. While no one aspires to live paycheck-to-paycheck or wants to be buried under a pile of consumer debt, learned behaviors are often factors in these challenging lifestyles.
Understanding how your money choices contribute to or detract from your financial growth is crucial to cultivating habits that benefit you and your family. Consider the following behaviors that might be sabotaging your financial future and how to correct them.
[See: 8 Big Budgeting Blunders — and How to Fix Them.]
Elevating your lifestyle with increased earnings. Lifestyle inflation is how some people who earn six figures can feel like they’re living paycheck-to-paycheck: They spend what they earn. When your income increases, it’s natural to want to increase your spending to reflect your earnings.
However, it’s better to budget a one-time splurge and then continue to live as though the increase never happened. The extra funds can go toward increasing debt payments, boosting retirement contributions or adding to savings account balances. It may not be as in-the-moment satisfying as upgrading your handbag, but few things are as long-term satisfying as financial stability.
Spending money when you’re broke. People with financial problems may continue to spend money they don’t have because they figure the damage is already done. This fatalistic attitude is likely the worst thing you can do to your finances because you make it harder for yourself to take corrective action. While it’s difficult to admit you’re in financial trouble, doing so is the first step toward getting yourself out of it.
Consider seeking professional help if you’re struggling with debt and overspending. GreenPath Financial Wellness is a nonprofit organization that offers free credit counseling to help educate consumers on their options for getting out of debt.
[See: 12 Ways to Be a More Mindful Spender.]
Falling into a yo-yo budgeting pattern. Like dieting, overly strict budgets can lead to binge-spending and sabotage your financial goals. While extreme frugality can be an effective means of paying down debt quickly, you should balance restricted spending by identifying cheap or free ways to entertain yourself and your family. Doing so will help you endure the challenging moments when you’d rather spend money on a weekend getaway than pay down your student loan.
Assuming little purchases don’t count. Those who feel cash-strapped by debt may not recognize small expenditures as contributing to their financial problems. In fact, 25 percent of American consumers identified “excessive or frivolous spending” as a behavior they’re guilty of, according to Northwestern Mutual’s 2017 “Planning and Progress Study.”
While fast-food purchases or dollar-store finds may seem innocuous, these items add up over time. If your debt is keeping you from savings and lifestyle goals, you need to get serious about paying it down. This means making sacrifices and doing away with these small expenses to curb unnecessary spending.
Failing to let go of unaffordable expenses. Another inhibitor to financial growth is failing to recognize those large expenses that you need to eliminate in order to get ahead. This may mean trading your brand-new car for a less flashy version that cuts down on car payments and insurance. It also may include downsizing your home or moving to a more affordable city. These are not small concessions, but for some consumers, they represent the most effective means of safeguarding their financial futures.
[See: How to Live on $13,000 a Year.]
Making assumptions about your future. Most people assume they’ll make more money as they age and gain more experience. However, this is not guaranteed, and delaying saving and investing until you earn a certain income is a poor choice. What’s most important to your future is not what you’ll eventually earn but what you do with your money right now. Building responsible spending and savings habits will help you throughout your life, regardless of your age and income.
Allowing fear to control your finances. Effectively managing your finances is an intimidating task when you’re unsure of how best to go about it. Avoidance is not the answer, as your money will continue to control you until you decide to control it.
Financial education is most effective when you start small and make incremental changes to increase your confidence and momentum. The online personal finance community offers a wealth of knowledge of financial subjects ranging from budgeting and investing to achieving financial independence. Start with the least intimidating subject and learn what you can, then apply behaviors and activities that make the most sense for you and your family. As you learn more about leading a responsible lifestyle, you’ll be less fearful of taking the steps required for financial solvency.
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7 Behaviors That Threaten Your Financial Security originally appeared on usnews.com
