Many people might assume that people really cement their financial habits when they get a first job or home or car. But it turns out the way we deal with money, both good and bad, starts to take shape a lot earlier than adulthood. How we feel about money and our spending and saving patterns are actually distinct by about age five, according to a recent study. If those young habits and emotions are less than ideal, you may end up with adult-size issues: Studies show that 46 percent of Americans occasionally pay their bills late and 19 percent spend more than they make, according to the FINRA Investor Education Foundation.
Because good financial habits can take a long time to develop, changing ones that are less than ideal may seem difficult — but it’s within your grasp. Change takes both a recognition that there’s a problem and the creation of a plan to fix it. Here are five bad financial habits that you can change with less effort than you might expect.
The habit: Credit to pay for the day to day
The fix: A real budget. Credit cards can be useful tools for building a credit score and accumulating cash back or travel points for things that would have been purchased anyway. But when there’s a carried balance (and, therefore, a high interest rate) and you’re spending more than you make, credit card debt can quickly take over. A budget calculator is a great basic tool to help you plan and balance monthly needs and income. If it’s too difficult to refrain from credit card use, consider cutting them up and relying only on cash and debit cards.
The habit: A too-small savings account
The fix: A paycheck to you. Many financial planners recommend setting aside 10 to 15 percent of your income for retirement savings, but the average U.S. household currently saves only around 7 percent of its income. And let’s face it: Saving is easier if you sock the money away before you even see it. Instead of thinking of savings as losing out on money that could be spent, think of saving as paying yourself — first. Automatically divert a certain amount to a savings account or retirement fund. If you never see the money, you’ll never miss it.
The habit: Late payments
The fix: Automatic bill pay. For many, bill paying time equals stress, which in turn causes them to put off the to-do and incur late fees and credit dings. Auto bill pay erases that cycle in one fell swoop. One note: Only set up automatic bill pay if there’s enough money in your account each month to cover expenses. Otherwise, late fees may get traded for overdraft fees. And continue to check bills each month for accuracy.
The habit: Impulse spending
The fix: A list. Always use a shopping list, no matter the errand. It helps restrain purchases made on a whim instead of those made with a plan.
The habit: FOMO (Fear of Missing Out)
The fix: Goals. The neighbors, the internet, streaming commercials: Constant messages from all sorts of sources help convince people they need what they won’t use or can’t afford. Instead, set goals and focus them on experiences, not stuff. What’s your dream vacation? Your ideal retirement age? A side business? When you’re actively working toward saving for something concrete, you’re less likely to be distracted by things you can’t afford.