Everyone is guilty of falling into bad habits, especially given the fast-paced world we live in. While juggling our careers, families and other personal responsibilities, it’s easy to forget to take care of ourselves and we frequently lose focus of long-term goals.
Oftentimes, that lifestyle negatively affects our finances, and before we know it, we’ve fallen into a pattern that threatens to derail our future.
No one is immune to becoming a victim of bad financial habits. Wondering if you are guilty? Here are three common ones that can affect anyone.
1. Ignoring the Status of Your Finances
Whether your finances are stellar or unsatisfactory, it’s important to keep a pulse on them and consult with a professional so you stay in good financial shape! Too often, however, people bury their heads in the sand and try to enjoy blissful ignorance when it comes to their finances – but it never ends well.
This bad habit affects people on both ends of the spectrum: For example, someone can be in a tremendous amount of debt and may ignore seeking a solution to avoid confronting the realities of their situation. On the flip side, if someone is well off, they may miss the opportunity to save money that is already at their disposal.
The way to overcome this bad habit is to start paying closer attention to your finances. Regardless of whether you’re living paycheck-to-paycheck or if money is no object, you need to be keenly aware of your spending and saving patterns, and, if necessary, adjust them so you’re on the right course.
A big component of this bad habit is that people avoid talking about money with their spouses and families, but this is an extremely dangerous rut to fall into, especially for those who are in trouble financially – staying hush-hush won’t solve your problems.
While these conversations can be uncomfortable, it’s important to make them happen.
2. Believing You’re Already Maxing Out Your Savings
Sometimes, when peoples’ finances are in a good spot, they get complacent and start to spend frivolously. It’s certainly important to reward yourself for your hard work, but you should also focus on saving extra money when you can.
You might be tempted to spend bonuses, tax returns and other windfalls on vacations or shopping sprees when you know you’re already allocating a certain amount to your nest egg. However, don’t get tricked into the mindset that extra cash should burn a hole in your pocket just because you are already contributing to retirement savings.
Find a balance between steadily contributing to savings and enjoying life. Know that you can always stash some extra cash away in a 401(k) (the max contribution limit is $18,000/year for people under 50), in an IRA or in a rainy day fund. You never know when it will come in handy!
3. Not Updating Your Retirement Savings Strategy
Have you recently moved, started a new job, got married or had children? These are examples of times when it is important to check in on your financial plan and make sure your retirement savings strategies are appropriate for how your life has changed. As I pointed out in my blog post about the outdated three-legged stool of retirement analogy, personal savings are the cornerstone of your retirement and it’s up to YOU to take charge.
While some of these milestones in life can be overwhelming, it’s important to ask yourself: What can I afford to save? There is certainly a domino effect to outdated savings strategies that don’t reflect your current and future life and those in it. If you don’t take the opportunity to revise how you save now, you could be missing out on keeping hard-earned dollars down the road.
Do any of these behaviors sound familiar to you? Don’t fret. Recognizing that you practice some of these bad habits is the first step to correcting them! Have you fallen victim to any bad financial habits I didn’t touch on? If so, feel free to tweet them to me @coolest401kguy and @ubiquitysavings