Like a toxic relationship, bad financial habits are tough to break up with. Instead of letting your messy relationship with money continue, focus on implementing creative approaches to renew your finances. Start by reviewing these six common money blunders and tackle the ones that are causing you the most pain. Addressing these tough finance issues today can set you up for success in the future.
1. A Budget That Won’t Listen
Do you excitedly log in to your bank account on payday? When you do so, do you find that your direct deposit has been washed away by bills? If this hits too close to home, find comfort in knowing there is a solution in store.
Review your spending habits and identify expenses that drain your account balance. If you’ve fallen victim to the “add-to-cart” trigger finger, consider setting a budget for online shopping. If you’re easily tempted while shopping in the store without a list, do your grocery shopping by using an app and use curbside pickup. Implement a budget for your expenses and disposable income to stay on track.
2. An Embarrassingly Low Credit Score
If the sight of your credit score alert email incites you to hit the delete key, it’s time to assess your habits. Your score is made up of five factors: credit utilization, credit mix, on-time payment history, credit length, and new credit. Review where you stand on each of these factors and make improvements where they’re needed.
To boost your score, consider adding a secured credit card to your arsenal. Here, you’ll use a card that’s secured by a funds transfer or initial deposit. The card works just like a more traditional one when you make purchases and pay your balance each month. And your on-time payments will bolster the information that’s reported to the credit bureaus. Over time, you could see your score improve significantly thanks to your good payment history.
3. Student Loans that Seem to Increase With Every Payment
Student loans are a drain on borrowers from Gen X to Gen Z. College expenses are shockingly high, and the early 2000s’ predatory lending practices haven’t done anyone any favors. Lingering college debt can hinder your ability to buy a home or make other big financial moves.
Check if your employer qualifies for federal student loan forgiveness. If so, work toward meeting the criteria. If not, consider if consolidation is in the cards for you. Remember, consolidation does disqualify you from future forgiveness. Make sure that you read the fine print before you agree to new payment terms and rates. Once you’ve got your new loan, pursue paying more than the minimum to get rid of it faster.
4. Credit Card Debt That Keeps Climbing
Most credit cards come with convenience and tons of rewards. They also come with tons of temptation and risk. Review your balances and habits to determine if credit cards are something you manage well or not.
If credit cards are a weak spot for you, consider discontinuing their use. Instead, shift to using debit cards for purchases as you pay down your credit card balance. Debit cards are typically backed with the same protection as a credit card, so you can use them confidently. Battle mounting interest rate charges by consolidating to a 0% rate and working to pay it off before it expires.
5. A Subpar Savings Account
It doesn’t feel great to see a skinny savings account, especially when you feel like you have mounting financial obligations. Work to overcome this situation by treating your savings account as a bill you have to pay. Start with even $5 per paycheck to build good habits. Set up an automatic transfer on payday and increase it over time.
As your account balance increases, consider segmenting your savings into categories that make sense for you. Start with an emergency fund, a repair fund, vacation fund, and savings for fun. When you make measured progress toward saving for the expected and unexpected factors in life, you can breathe easier. And, when you’ve planned ahead, you can avoid taking on debt in the face of a crisis.
6. No Plan for Your Financial Future
Do you plan to work until the day you die? While a great work ethic is admirable, work isn’t all life has to offer. Start taking care of future you now by dedicating money for retirement. Check out what retirement benefits your employer offers and try to take advantage of any contribution they provide. Some require you to dedicate funds before they will match them, but look at it as easy, free money.
If you’re not sure how to come up with extra money for 40 years from now, get creative. Consider selling unwanted or outgrown items on Facebook Marketplace and direct those funds to a Roth IRA. In this account, your money grows tax-free, which can be a big advantage during your retirement years. When you use new money from selling old items, you’ve avoided taxes on the initial income, too. By using your creative efforts, you have just created a win-win and a fat retirement account.
Wrangle Your Finances and Your Life
Figuring out your finances is one of the most adult things you can do. While age doesn’t necessarily mean that you’re mature, prioritizing financial security is a leading indicator. Get real with your money situation and make the sometimes painful decision to restrict your bad habits for long-term benefits. Take care of your whole financial picture, so you can lead a more stable and confident life.