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HomeBlog Budgeting3 Bad Money Habits and How to Avoid Them
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3 Bad Money Habits and How to Avoid Them

August 20, 2020 by Libby Donovan

bad money habits

No one wants to admit that they have bad habits, but everyone has them. Bad habits can be detrimental to your health, to your finances, or can impact your mental wellbeing. Success in quitting any bad habit hinges on replacing it with good habits. The people who quit smoking are often the ones who replace it with better habits, such as exercise or healthy snacks. If your bad habits lie in how you handle your finances, then replacing your bad money habits with good ones will have a positive impact on your life by reducing stress and giving you better financial footing. Check out some bad habits and learn how to replace them with good ones.

1. Not Putting Money in an Emergency Fund

According to MarketWatch, 38% of Americans couldn’t handle a $500 emergency without borrowing the money. If 2020 has taught anything, it’s the importance of being prepared for the worst; however, even a small emergency such as an unexpected auto repair shouldn’t derail your finances entirely. A general rule of thumb is to have at least 3 months’ worth of expenses that includes all your bills, rent or mortgage, food costs, and other regular expenses, saved in a separate account.

Replacement Idea: Create an Emergency Fund of at least $1,000

It can seem like a daunting amount, but if you have to start small, do so and give what you can. It all adds up. Rome wasn’t built in a day, as they say. Set up your emergency fund in an account separate from your regular checking and savings accounts and have an automatic deposit made into it from each paycheck. Even if it’s only $20 a week; by the end of a year, you’ll have over $1,000 in it.

Look for expenses that can be cut that will allow you to put more away. Anytime you get any type of financial windfall, such as a bonus, tax refund, or raise, deposit the extra money in your emergency fund. If you don’t have money to start funding it, consider getting a side job and having the entire paycheck put into an emergency fund. Every little bit helps, and once you have enough money saved, you can break the bad money habit and you won’t have to rely upon credit cards if you’re faced with an emergency expense. Remember, if you use money in your emergency fund for an emergency, you’ll have to replace what you spent.

2. Overusing Credit Cards

Credit cards are the ultimate mix of convenience and usefulness all contained in a little slice of plastic. You don’t have to worry about having enough cash on hand or worry about whether your paycheck was deposited into your account, as is the case with your debit card. The thought of using a credit card wherever you go and paying it off at the end of your billing cycle is appealing; all your discretionary spending will be in one monthly bill! However, rarely do people pay it in full each month; in fact, 59% of Americans carry a balance on at least one credit card. Without enough savings or an emergency fund for backup, many people find themselves using credit cards to pay for their bills and groceries.

If used responsibly and balances are paid monthly, credit cards do have benefits. Rewards programs and frequent flyer miles can help you earn and save money, and if you have a big purchase and you have a 0% interest offer or a low-interest card, then you can save money by putting it on a card instead of taking out a loan. If you travel for business, putting your expenses on a credit card can be a useful way to keep your work and home finances separate.

Replacement Idea: Work to Eliminate Credit Card Debt

Vow to not use your cards and leave them at home. If you have to think before you use them, it’ll decrease the odds that you’ll use them impulsively. Some people have gone so far as to freeze them in a block of ice and keep them in the freezer to change their bad money habits; if your willpower is low, this is a good idea. 

Pay more than the minimum monthly payment. Throw any extra money you can at paying down your credit card debt, even if it’s a few dollars here and there. As with your emergency fund, consider getting an extra job and devoting the paycheck to your credit card debt.

3. Not Sticking to Your Budget

Most people have some kind of budget, whether they have it written down, use an app, or just have spending limits in mind when they go to a store. Budgets in any form can be a challenge. Spending money is a lot more fun than saving it, but if you have debt or you’re struggling to pay your bills, you need to budget your money.

Replacement Idea: Create a Reasonable Budget

The biggest mistake that people make when they create a budget is making one that’s too strict. If you eliminate all discretionary spending and don’t leave yourself a little wiggle room for fun and entertainment, you won’t stick to it. If you can create a budget that you can live with, you’ll be more likely to achieve long-term success.

Replacing your bad money habits with good ones will help you put all your financial mistakes in the past and create a more stable financial future. Get started on those good habits today!

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** Audited by: Dianne Ernsting ** Easy National Debt Relief Caller: April Transcribed WE 2/28/2021 April: My calls may be recorded as well. How did you first hear about National Debt Relief? CHARLES: Let’s see. I was with another company and I wasn't happy with their service, so I started searching for another one. And National Debt Relief came up. And when I called and talked to them, I was so impressed by their customer service. I was like, “Wow! I have to try this company.” April: So now, whenever you first signed up with National Debt Relief, could they work with you in terms of consolidating your debt as you needed? CHARLES: Oh, yeah. Yeah. April: Well, how far are you at this point? Are you most of the way through, halfway, or just started? CHARLES: About halfway, I would say. April: That’s better than where you started. CHARLES: Absolutely. Absolutely. April: Well, so how would you describe the experience you had with the representatives who helped you through the process? CHARLES: Oh, my gosh. He was absolutely the best. In the past, when I was able to work, I gave superior excellence as far as customer service was concerned. And the gentleman that helped me, he was another me. He did everything and anything possible to answer all my questions and make sure that I felt comfortable. And actually, in talking to him, I felt like I knew him for the longest time. And he added a little bit of his own personal statement into our initial conversation, which helped make me feel more comfortable with him and like he really cared. And in the end, I feel that he really did. April: So they helped you feel very comfortable and confident in going with the procedure. CHARLES: Oh. yeah. April: And since you've started, you’ve made such progress that it's hard to stop. I imagine. That's great. CHARLES: Yes. April: With your overall experience then, where would you rate National Debt Relief with a scale of one to five if five stars says that you’d recommend this to your friends and one star is you’re very dissatisfied? CHARLES: A 5. April: Since you started using National Debt Relief, how would you say it’s impacted your life, if any? CHARLES: Well, with the exception of COVID going on, I would say that it's made me a lot more relaxed and I'm not as stressed out as I was. And I am glad that I'm able to pay the debtors something at least. April: If you ever had a time where you couldn't pay well, were they able to work with you in terms of payment if you ever needed the help? CHARLES: Yes. April: So what were your thoughts about the cost of the service in relation to the quality of which you received service? CHARLES: Oh, there's many times I think they should be getting more than what they're getting for the type of service and the confidence that they instill in you. Everything that they said they were going to do in the beginning, they are doing, they have been doing, they're continuing to do. And I don't know if you know this or not, but I lost my vision recently. But I called National Debt and I let them know what was going on with my health, what my health conditions are. And then when I started losing my sight, I called them to tell them, “I think I'm losing my sight. I think I'm going blind. How am I going to continue on?” And they said not to worry. “We've got you taken care of.” They told me how bad they felt that I lost my vision and that they were going to do everything possible to take care of me in a different format than they would take care of a regular sighted person. April: In what ways were they able to implement a customized service for you at that point? CHARLES: Oh, my gosh. They still do everything that they did as if I were sighted, except they call me. I've given them another number that they could send a text to if I had to call them back right away, if it was an emergency. But for the most part, they just call me and tell me what they need to do or what needs to be done, or, “This is an update,” or, “This is what we suggest you do,” and so on. So I still feel very confident in their abilities and everything. April: So basically, instead of relying on you to see an email for updates on what's going on, they will call you to give you a verbal of what's going on? CHARLES: Yes, ma'am. Yeah. April: That's wonderful. CHARLES: Yeah. It is wonderful. And I don't know many companies today that are willing to do that. "You’ve all gone over above and beyond the call of duty," I tell them every time. April: And that really tells me that they have compassion over there, too. So that's good. CHARLES: Yes. April: I would love to use the experience you had and share that to the world, where if it's okay with you, we would publish that on our webpage here. So it'd be on a public webpage. But the goal is to help other consumers who may be in the same boat to help themselves, of course, to make some better choices. And would that be okay with you? CHARLES: Sure. Absolutely. April: And just so you know, I won't use your last name. It will just be the first name. CHARLES: Sure. April: Is that a link you want to receive? CHARLES: No, I'm fine.

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