Change your Money Habits

Having more money is something most people aspire to, but when your income is fixed, having more money is not an easy goal to reach. Looking at your money habits may give you some clues for how to make your money work better for you. That doesn’t mean that you have to cut back on all the things that make life fun - in fact it’s quite the opposite. Bad money habits result in your money being wasted unnecessarily or used on things that are not important to you.

Changing your money habits can mean that you have fewer worries about money and that you can afford to enjoy yourself. Everybody has different money habits. Here are a few bad habits that could be holding you back from achieving your goals:

Spending more than you earn

Paying bills late and therefore missing out on discounts or paying penalties

Buying things on impulse that you never use

Paying only the minimum on your credit card balance

Spending up to the limit of your credit card

Not having an emergency fund for unexpected expenses

Not knowing what you spend your money on

Making frequent cash withdrawals when you use EFTPOS

Being underinsured or having no insurance at all

Borrowing money from friends and family to make ends meet

Paying everyone else, and only saving what’s left

Buying expensive gifts for others

It’s hard to change habits. The younger you are, the easier it will be to change. The first step is to clearly identify what your bad habits are. Looking over your bank and credit card statements from the last three months will give you some clues as to what they are. Now make yourself a list of promises that you will keep that are the opposite of what your bad habits are. For example – ‘I will spend less than I earn’, ‘I will pay my bills on or before their due date’ etc. Write the list down and put it somewhere where you can see it every day.

Now set yourself a goal that you really want to achieve – something that is within your reach within the next six months if you keep your promises to yourself – and make sure there is a reward attached to it. If you have debts, your first goal should be related to eliminating or reducing them. For example, you might set yourself a goal of paying off your credit card within six months, then treating yourself to a meal at a nice restaurant, (paid for from savings rather than your credit card!). If you don’t have debts but still find it hard to save, set yourself a goal of saving for something you really want, and which you could realistically attain within six months. By setting yourself short term, achievable goals and rewarding yourself for reaching them, you will learn habits that will then enable you to set and reach long term goals.

July 2008