Have you ever made a promise to change your spending and saving habits, and not followed through? The good news is you're not alone! The bad news is, you could be hurting your financial future.
Habits are hard to change, but with some practice and patience, it's possible! Here are a few poor financial habits I see and hear of the most frequently. Do you identify with any?
Poor Financial Habit 1: Retail therapy
We all like spending money on the things we enjoy, like restaurants, clothes, cars, or vacations, because when we buy we feel instantly gratified. Like most behaviours, our spending habits reflect our backgrounds, experiences and psychological make up, and while tastes and disposable income may differ, the logic behind our spending habits is generally the same. In short, spending money allows us to feel in control.
According to a study in the Journal of Consumer Psychology, people usually shop when they're feeling sad – an emotion strongly associated to feelings having to do with a lack of control. Shopping can actually release endorphins in the brain, however spending money to feel good can become addictive (seriously, shopping addiction is a real thing).
Next time you're indulging in a little retail therapy, ask yourself if it's because you really need the things you're buying, or if you're spending as a way to lift your spirits.
Poor Financial Habit 2: Paying yourself last
You say you'll top up your retirement contributions or put a little more money in your emergency fund (once your next paycheque comes, promise!), but another month passes and you haven't contributed a penny.
I get it, bills needed to be paid, the dog had an unplanned visit to the vet, and your kid(s) needed new winter coats and boots (and pants, hats, food… etc). But by not prioritizing yourself and saving before you pay a penny elsewhere, you could be putting your retirement security at risk.
Make a financial goal to set aside a portion of your paycheque each time you're paid. Better yet, automate it if you can (most bank apps will allow you to do this)! You'll be happy you did the next time Rover eats a sock, or your car fails you!
Poor Financial Habit 3: Trying to keep up with the Joneses
The classic idiom refers to the comparison you make between you and your neighbour, or whomever, as a benchmark for social class and the collection of material possessions. Failing to keep up with the Joneses is a no-no, and is perceived as demonstrating socio-economic or cultural inferiority.
Here's the catch – keeping up with the Joneses , will make you unhappy and most likely broke. Especially these days, where the Kardashians are the modern day version of the Joneses.
Competition is a strong motivator for man, but it's important to remember, wants are not needs. Coveting a lifestyle that's not your own can lead to excessive consumption and spending. Rather than focusing on someone else's financial situation, spend that energy on your own financial situation. Figure out your financial goals, and achievements, then see if they have anything to do with Mr. Jones. Chances are, they wont.
Check back next week for Changing financial habits, pt. 2.