We’ve all got habits, good and not so good, and our finances are no exception. We all know how hard it is to change a habit but what if you knew what it was costing you? Would you want to change; even just a little? We’ve listed seven common habits everyone can relate to.
Buying Lunch … and Coffee… and Snacks…. Everyday!
If you live or work in a city or your drive to work takes you past five different drive throughs, buying lunch out can be all too easy and problematic if your habit starts absorbing the money you’d prefer to save for something else … like a holiday. This habit might not be so simple to change quickly but even if you took lunch to work two days a week, saving you $20, that could amount to $1000 over the year. Check out this cool savings calculator to estimate what you could save. You can even factor in interest if you were to put that money into your savings account.
Neglecting to Get the Best Rate
Sure, paying your bills on time is a good habit but paying more than you should is a bad one. Make a start on looking for better deals by checking your provider’s website to see what kind of introductory and special rates they currently offer. If you can negotiate only $10 off a monthly bill, you’ll save $120 a year.
Not Prioritising High-Interest Debt
All debt isn’t equal. So while you should always pay the minimum on your various debts, be it personal loans, credit cards or a mortgage, a more productive strategy is to rank your debt in order of highest to lowest interest rates, and prioritise paying off the debt with the highest interest rate first by devoting any extra cash toward that debt. Once it’s paid off, you move down the list to pay down the next high interest debt.
If you’re sitting on a $10,000 credit card balance with 12% interest, you’re paying $120 in interest a month. Since most lenders require that you pay at least your interest every month, you’ll need to pay more than $120 a month in order for your balance to start decreasing.
Carrying a Credit Card Balance
While there’s nothing wrong with responsible credit card use, if you can’t pay your entire bill on time, also known as carrying a balance, you’ll get slugged the interest, which just adds to your debt.
Saving Your Savings Goals for Last
Many of us are in the habit of paying outside bills and obligations first, and then relegating any leftover cash to savings, whether it’s for an emergency fund, a wedding, a down payment on a home or a trip abroad.
What we probably fail to take into account is that saving money should also be an obligation to ourselves. The fix here is a simple habit that you pay yourself first. Setting up an automatic contribution straight from your income into your savings account will help this happen and perhaps you won’t miss the money you don’t see.
Dining Out to the Detriment of Your Budget?
Many of us tend to use dinners out as a way to catch up with friends whom we haven’t seen in a long time and even those who we see all of the time. Instead, why not meet up for drinks or coffee? Even better: Stick close to home.