If you’re trying to get your finances on track, old money habits can undermine your progress. No matter how much you work on making better financial decisions, you still need to change the things that are holding you back.
Let’s take a look at some common old habits and how to overcome them.
Old Habit: Living without an emergency fund
Not having an emergency fund is a sure way to end up in debt. Or if you’re already in debt, it’s a sure way to go deeper into it.
What to do instead: Experts recommend having three months’ worth of living expenses saved up for the unexpected. But if that seems like a huge number, start small. Set a goal of saving £500 or £1,000 within the next three to six months. This could involve taking on a side job or finding some work online to up your earnings so you can save faster.
Old Habit: Living on credit
Credit cards and loans have their place and purpose, but if you rely on them constantly for everyday living, the debt cycle is unlikely to end. It’s one thing to take on a loan to buy a home or consolidate debt. It’s very different to use your credit card regularly for eating out, buying clothes or going on holiday.
What to do instead: If you’re overwhelmed by debt, talk to a financial advisor or a non-profit like the Money Advice Service to see what your options are. They can help you figure out a way to pay off the debt you already have. This might include paying more than just the minimum monthly repayments and not charging more things to your credit cards.
Old habit: Making money decisions without a budget
It’s difficult to manage your money if you don’t have a budget, but it’s equally difficult to improve your finances if you don’t have goals.
What to do instead: Once you understand where your money is going, you can then set up specific financial goals, such as “save £1,000 for a holiday” or “pay off my car by next September”.
Old habit: Making late payments
Sure, late payments come with fees and penalties. But they also cost you in the form of a lower credit score, which can then affect your ability to get a mortgage or a good interest rate on a loan.
What to do instead: Setting automatic payments online is the easiest way to avoid late payments. But if you’re paying late because you don’t have enough money, it’s time to look at your expenses and see what you can eliminate. Cutting down on unnecessary expenses – unused gym memberships, too much eating out – can help you keep up with basic bills.
Old habit: Using shopping as entertainment
Shopping can feel fulfilling: you spend a few hours looking at nice things and then eventually take home one (or a few) of them. But shopping for entertainment because you’re bored rather than shopping for a purpose can be dangerous for your budget.
What to do instead: Shopping addiction is real. If you suspect you might have a problem, talk to your doctor. Otherwise, find other ways to entertain yourself. Go for a walk with your dog, join a virtual book club or take a class online.
