7 Things People Who Are Bad With Money Do

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No one wants to be accused of being a bad money manager. Unfortunately, poor habits are far too easy to create. It is painfully simple to start living beyond your means. All it takes is an extra night out with your significant other each month, getting a membership at a nicer gym or upgrading your Netflix subscription. Life is great until you get the bills. Suddenly, you are struggling to make those necessary payments or eating ramen every night for dinner.

Ironically, the cause of your poor monetary habits could be a raise. A bigger paycheck can lessen the burden of keeping up with your bills, or it can trick you into thinking you have more money than you do. You start spending thoughtlessly because you believe you have money than you do. The extra couple thousand dollars a year you are now earning makes no difference if you waste it.

Poor money management habits are tied to more than just overspending. Living paycheck to paycheck, while sometimes necessary, is not an ideal situation. Bad monetary habits have the potential to keep you trapped in that cycle for a long time unless you make a change. Here are seven things people who are bad with money do and how to break those habits.

Eating Out Too Often

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Everyone has times they either want or need to eat out. Maybe you ran out of time to make breakfast this morning and need to get a breakfast sandwich on the way to work. Maybe your coffee machine broke, and there is no way you can make it through your hour commute without some caffeine. Maybe you are just really craving a philly cheese steak pizza. Whatever the reason, eating out every now and then is not usually a cause for concern. Starbucks and Dominos become a problem, however, when you always eat out.

The average American spends about $10 when they eat out for lunch. So, if you “forget” your lunch twice a week, you will be spending over $1,000 a year just on lunches. Now, add in a few dinners out or, even worse, a large coffee every morning. The lattes and sandwiches start to add up quicker than you expect.

Work to control your habit of eating out by removing excuses. Make extra servings at dinner on Thursday, so you can eat leftovers on Friday instead of “having” to get a pizza. Start the coffee as soon as you roll out of bed in the morning, so you can have it for your morning commute. If you normally get dinner with friends to catch up, suggest a potluck at someone’s house rather than an expensive night out.

Paying Too Much

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Paying no more than necessary seems like pretty basic money management, but you might be making this exact mistake. If you have access to 800 TV channels but only watch “Law & Order” reruns, your cable or dish bill is going to be much higher than it needs to be. Similarly, if you subscribe to a magazine but toss each edition in the trash as soon as it arrives, it is time to cancel your subscription. Look through your home for what you no longer need or use. If it is November and you last went to that nice health club in March, it is time to cancel your membership.

You can also cut costs when you shop. Sign up for a frequent buyer card at your normal grocery store, and pay attention to sales. Buy store brand or generic paper towels and toilet paper. Only purchase the brand name items when it really matters. Make sure you pay attention to the expiration dates of food as well. If you bought a bushel of apples but only ate one, you are throwing the rest of your money away.

Carrying a Credit Card Balance

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Carrying a balance on your credit card can cause massive problems in your finances. Credit cards have high interest rates, usually between 12 and 25 percent. This means that a small balance can become a huge problem with extraordinary speed. The average credit card balance is around $8,400. On an 18 percent interest card, that $8,400 mutates to cost you $20,615.

Avoid letting the interest pile up in the first place by paying off your whole balance as soon as the bill comes due. If there is ever a time when you absolutely have to carry a balance, keep the balance as small as you can. The interest on a $600 balance is much easier to pay off than the interest on a $1,500 balance. In the event that you have to carry a balance one month, be very frugal for the next four weeks so you can pay off the balance on the next bill. The sooner you pay off the balance, the sooner you can stop worrying about the steadily growing interest.

Not Prioritizing Your Savings

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This is an easy trap to fall into. After all, the most important thing is to make sure the rent is on time and that your water stays on, right? While paying for necessities first is not in and of itself a problem, it is easy to keep spending once the priorities are taken care of. Those new jeans look so tempting, or you decide you really do need a new pair of sandals, so you buy “just this one thing.” Suddenly, you are only putting $5 a month away in savings.

Prioritize your savings like they were another bill you had to pay. Pay the utilities bill and the mortgage payments, and then pay your “savings bill.” Decide on a set amount that makes sense for you and treat your “savings bill” like it is an obligation. Force yourself to put aside the money you said you would save before you buy anything that is not an absolute necessity.

Missing Payments

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Paying your bills late will hurt you both now and in the long run. Most bills have fees associated with late payments, and they vary in size. A few late payments on items that have hefty fees can tip you over the edge in a hurry.

Forgetting to pay your bills will also hurt you in the future. The company may not shut off your water or you might get your internet back after two long days, but the consequences of your late payments are not over. Late payments can damage your credit score, so those consistently late cable bills could end up costing you the loan you needed to buy a new car.

Take the pressure off yourself, and set up auto-payments. Most companies today offer auto-pay options that deduct the bill directly from your checking account, or charge the bill directly to your credit card. Just make sure that you stay aware of what you are spending. Auto-payments keep you from forgetting to pay your bills, but they can also keep you blind to how much money you have left in your account.

No Budget or Not Tracking Your Spending

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A good budget is your best friend when it comes to money management. Without a budget you are flying blind. You have no way of knowing how much money you need to set aside for necessities or how much you can reasonably spend on “fun stuff.” Take the time to sit down and figure out what your known costs are. For bills that fluctuate, like water and electricity, determine the range that you normally pay. Then, plan on paying at the high end of that spectrum. It is better to have a smaller bill than you planned on than a larger bill than you expected. Once you know how much you will be spending each month to keep a roof over your head and food in your belly, you can calculate how much money you can spend on frivolous or fun activities.

Your budget, however, does you no good unless you track your spending. Keep a running total of how much you have spent during the month. Write down everything from the $250 purse to the pack of gum at the supermarket. Unless you write it down, you will forget, and those small purchases can add up quickly. How you keep your list does not matter. You can keep it on a pad of paper or in a specifically designed budget app on your smartphone, as long as the list is accurate.

No Emergency Fund

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No one can predict everything. Life will catch us off-guard in the worst of ways, and small accidents can come with a big price tag. Have money set aside to pay for the unexpected emergencies that will inevitably arise. Sticking your head in the sand and pretending that “it won’t happen to me” will leave you woefully unprepared for any problems you encounter. Instead, make it a point to set money aside to pay for car or property damage, unplanned illnesses or injuries. If you have an emergency fund, a car accident or broken leg is less likely to wipe you out financially.

Insurance will cover some costs but not all. Without an emergency fund, even something as small as a flat tire can put a serious strain on your finances. Think of your emergency fund as a bill, just like your “savings bill.” Put some money aside for any of life’s unpleasant eventualities. That way, when your car does break down, you have some money to fall back on to repair it.