10 bad money habits that can have a major impact on your future

The things you do today can influence your future. Good money decisions made now lead to a brighter, more financially secure tomorrow. Likewise, there are bad financial habits that can sink your future and lead to debt and devastation.

Every money decision you make everyday will influence the outcome of whether you’ll be successful paying off debt or building wealth. As you lay your financial foundation, here are 10 bad financial habits to avoid:

1. Spending money without tracking.
One of the biggest pitfalls likely to trip you up is spending without tracking. When we just try to keep track of it in our heads, we aren’t accurate. You are much better off actively tracking your spending, or at least using a personal finance app that will do the tracking for you. If you don’t know where your money is going, you’re more likely to spend more than you earn, and that way leads to debt.

2. Keeping up with the Joneses.
It’s easy to fall into the trap of trying to buy thing things that other people have. Unfortunately, buying what you think you “should” buy forestalls thinking about your priorities. You could easily spend your way into debt and a poor financial future just by trying to “fit in” with your neighbors. Instead of keeping up with the Joneses, figure out what matters to you most, and stop spending on what’s unimportant to you.
3. Spending everything you earn.
Even if you aren’t exceeding your income, you still might be putting your financial future at risk. You should spend far less than you earn so that you can make saving a priority. Follow the old advice to “pay yourself first” and set money aside for the future and for a rainy day.

4. Using credit as an emergency fund.
One of the main reasons to set money aside for savings is so that you can build an emergency fund. Too many people rely on credit cards and home equity lines of credit for emergencies. Once you fall into this habit, it can be costly. Paying interest on your emergencies can lead to more debt later, and it also means that you are less able to handle problems in the future.

5. Habitually making late payments.
Your late bill payments can cause serious problems for your financial future. First of all, you run into late charges that can cost you money right now. However, repeatedly late payments can also result in a lower credit score. When you have a lower credit score, you will pay more in interest on your other loans, and you might even be unable to qualify for home loans or other loans that you might be interested in.

6. Neglecting your credit report.
It can be easy to forget to check your credit report, but you don’t want to. Your credit report offers information about your financial habits, and can also provide you with warning in the even of identity fraud. Your credit can be trashed by fraudulent accounts that you know nothing about if you aren’t careful. You don’t want your first clue that there’s a problem to be a rejection for a car or home you are trying to buy. You are entitled to a free report from each of the major bureaus every year by visiting AnnualCreditReport.com.
7. Putting off insurance coverage.
You might be surprised at how useful insurance can be. If a natural disaster destroys your home or a medical accident puts you in the hospital, the cost can be devastating. You might find yourself in deep debt or raiding your retirement account if you don’t have adequate insurance coverage. Periodically review your coverage to ensure that your assets are properly protected.

8. Withdrawing money from your retirement account.
Don’t get into the habit of withdrawing money from your retirement account to pay costs. First of all, it can cost you a 10 percent tax penalty if you withdraw early from some types of accounts. Next, you are putting your future at risk since you no longer have the money in there earning interest. If you keep taking money out of your account, it won’t build over time and you’ll be without a comfortable nest egg.

9. Paying too much attention to sensational investing headlines.
One of bad financial habits that you might not view as a problem is paying attention to the media. Unfortunately, sensational headlines sell, and that means paying too much attention can ruin your financial future. If you panic and change your financial plan due to the reports of today, you could miss out on future growth, as well as lock in losses. While you do need to be an informed investor, you shouldn’t mistake sensationalism for rational analysis.

10. Putting others first.
We’re told that we shouldn’t be selfish, but sometimes you really do need to put yourself first. If you put your child’s college fund ahead of your retirement, or if you are willing to cosign on someone else’s loan, you could find your finances in jeopardy. As a cosigner, you could be on the hook for someone else’s bad habits, and you can’t rely on others to take care of you later. Make sure that your finances are secure before you expend your resources on someone else. Plus, if you are financial secure, you’ll be able to better help others in the long run.




Nuria Pujol