When you want to save and invest your way to financial self-sufficiency, it’s prudent to keep your spending habits in check.
Breaking away from bad spending habits will have a compounding effect on your financial position over time and make it much easier for you to achieve your long-term financial goals.
Here are five of the worst spending habits you need to get rid of.
Shopping when you don’t need to
You should only shop when you need to buy something.
Shopping when you are bored or depressed, making impulse purchases, shopping for status, buying something just so it is available at a discount, and buying something just to rake up the reward points are all poor habits that you should avoid at all costs.
Retailers will entice you with the promise of “bigger savings” if you buy more.
In reality, you will spend extra cash and end up with excess things you don’t need.
Eating out and snacking regularly
If you want to save more and invest more, one of the habits you need to curb is eating out frequently.
Data shows that the average American household annually spends more than $3,500 on eating out. By cooking your own meals, you can not only save hundreds of dollars every month, but also stay healthy.
Apart from eating out, the habit of snacking is as harmful for your budget as it is for your health.
Did you know that the average American spends nearly $500 on snacks every year? If you are a big snacker yourself, think about how much debt you could pay off or what you could invest in with an additional $500 every year.
Overpaying for car insurance
The automobile insurance industry is intensely competitive and insurers tend to do everything they can to find new customers and retain existing customers.
If you have a clean driving record, there is no reason why you should pay more than what you need to for auto insurance.
It’s why you need to review your auto insurance rates at least once a year, compare the rates offered by other insurers, and find out whether you have got the best deal possible.
If you are willing to negotiate with your insurer, you might be able to get an even better deal.
Credit card debt
Of all the bad spending habits, this could potentially be the most damaging, as it can drown you in debt before you even realize it.
If use your credit card excessively and only pay the minimum, it can take you several months or even years to pay off your balance, as a result of which you might end up paying hundreds or even thousands of dollars in interest alone.
The golden rule you must follow when it comes to credit cards is, use it only if you can pay off the balance in full and do not utilize more than 30% of your credit limit.
Keeping up with the Joneses
Competing with friends, relatives, neighbors, and co-workers is intrinsic to human nature.
But trying to compete with others in terms of spending rather than earning is self-defeating. You don’t have to buy a more expensive car or designer clothes just because some other people in your close circles are doing so.
They could be earning more, or they could be living off high debts. There is no way for you to know it.
Keeping up with the Joneses is a financial folly of the highest order, which needs to end before it is too late.
