One day you might come to the sudden realization: I’m not where I want to be financially.
Perhaps you thought you would’ve paid off your debt by now, or maybe you think you should be closer to buying a home. Most of us set financial goals for ourselves, but reaching these goals is much easier said than done. Several factors can slow down or hinder progress, and often times, we don’t reach goals because bad money habits hold us back.
Revamping your personal finances is one way to get back on track. But before you can do this, you have to identify your bad financial habits.
1. Track your spending to see why you don’t have extra money
Reaching many financial goals requires disposable income. If you earn a decent salary, yet never have extra cash, this can say a lot about your budgeting habits. The first step to identifying bad financial habits is tracking your spending.
For an entire month, write down everything you purchase or save receipts. This includes purchases for groceries, entertainment and miscellaneous expenses. At the end of the month, review your spending patterns. A self-evaluation might be the epiphany you need. For example, you may realize that you’re spending a large percentage of your disposable income eating out, or maybe you have a bad habit of impulse shopping and buying things you don’t need. Both habits can make it seem like you never have money. But the real issue isn’t lack of money, but rather you’re spending money on the wrong things.
2. Observe how others manage their money
If you’re always broke and you don’t know why, take a lesson from your friends or relatives. If you know someone who’s financial savvy, observe this person, ask questions and learn their secrets.
This person might be depositing 10% of his or her pay into savings each pay period. Do you do this? Or this person may save up for months or years to buy an item, rather than going into debt. Do you do this?
Observing how others manage their money can reveal a few of your bad habits. For example, you might ignore feeding your savings account, but instead spend money on things you don’t need. And rather than exercise financial patience and save up, you might use a credit card for items you can’t afford.
3. Observe how your children manage money
You can also learn a lot about your bad financial habits by observing your children.
Children -- whether young or adults -- typically imitate the financial habits of their parents. So, if your children can’t budget their money, or they’re always spending money on things they don’t need and they don’t see the importance of paying bills on time, take a long hard look at yourself. Did they learn these lessons from you?
4. Get a financial advisor
Working with a financial advisor can point you in the right direction. A financial advisor can help in every aspect of personal finance, from saving money to buying life insurance. It’s their job to dig deep into your situation, listen to your concerns and offer suggestions to help you overcome bad financial habits.
Identifying bad money habits is one of the first steps to improving your personal finances. After making changes to the way you spend money, you may enjoy more disposable income -- which puts you closer to reaching financial goals, such as saving for a house and paying off debt.
Photo Credit: Flickr