Let’s be real. Most of us have been, at some point in our lives, guilty of some bad financial habits (I know I’m guilty as charged!). Bad money habits can have a tendency to follow us around, but it’s never too late to address them and improve your finances. We’ve put together a list of the most toxic money habits we’ve seen (and have personally been guilty of in the past) and added some tips on how to fix them right up!

1. Not having a rainy day fund

We hate to be the ones to break it to you, but rain is inevitable. Whether it’s an economic crisis or an unexpected car repair, life always finds a way to throw something your way and it’s good to be ready for it! If you don’t have an emergency fund, you’re more likely to use credit to cover these unpredictable costs which ends up costing you more in the long run. 

How to fix it:

Add an extra 5-10% into your savings at the beginning of the month (so if you were planning to save 10%, put in at least 15%). A good target is to have enough in your emergency fund to cover three months of expenses. Consider a separate, high-interest savings account for your rainy day fund so that you’re less tempted to dip into it for everyday expenses.

2. Not having a budget

Without a budget it’s easy to lose track of money and spend more on a day by day basis. A budget helps you track where money is going each month and take control of it. It takes time, but it’s worth it!

How to fix it:

Do a deep dive into your spending habits. Add up all of your income and identify your personalised financial goals. Start by analysing where you are now and where you want to be.

You don’t need an accountant or special software to set up your own budget, but if you need help, our favourite app is Mint. It’s free, easy to use  and will help you track and save money.

3. Retail therapy aka “Treat yourself” mentality

We live in a society that applauds rewarding yourself and views restrictions as boring. Yes, life is hard (especially in 2020!) and you deserve the world, but the truth is, impulse spending doesn’t actually fix anything. In fact, research shows it tends to make things even worse.  The brief moment of happiness you get from buying inevitably fades away, leaving you with piles of unneeded stuff and a matching coat of guilt. 

How to fix it:

Buy items only from a list that you’ve made at a time of calm, not when you’re trying to distract yourself from negative emotions.

Never save your credit card info on shopping sites – you’re more likely to spend if it only takes one click.

Keep a good habit of waiting at least 24 hours before giving in to unplanned purchases.

Try to reduce temptation by opting out of emails from your favorite stores. 

4. Depending on credit cards

As the one and only Warren Buffett put it: “Avoid credit cards….just forget about them.”

Credit cards are convenient, but most people don’t use them responsibly and find themselves in a heap of financial trouble. According to Finder, the average Australian credit card balance is $3,258. Of that amount, about two thirds ($1,986) is the average amount accruing interest. The total amount we owed as of June 2017 was nearly $45 billion, according to the financial regulator’s report. Scary, huh?

How to fix it:

Stop using credit cards immediately. Set a strict budget and use the snowball method to strategically pay off your debts. 


5. Living in a money coma

Another toxic money habit is ignoring issues you don’t want to deal with. Burying your head in the sand is a one-way ticket to financial disaster and the problem won’t go away when you pretend it doesn’t exist. Avoiding checking your bank balance is like not going to see a doctor when you know something is wrong.

How to fix it:

Set aside 10 minutes a day to look at your budget and savings goals, and you’ll thank yourself later. If needed, get help from a family member, friend or financial advisor. The best way to improve things is to look at the problem and figure out a plan to get to where you’d like to be. Once you accept your position, you can take control!

We hope these suggestions have provided some inspiration. It’s not too late to take control of your money and start the journey toward financial independence! Your wallet will be grateful.

Have you seen a toxic money habit that we’ve missed? We’d love to hear it, let us know in the comments.

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