Money Matters: Financial habits to give up in 2022
Are you making a financial New Year’s resolution this year? In a survey by Fidelity Investments, surveyors found that 43% of Americans making a financial resolution want to save more money, 41% want to pay down debt and 31% want to spend less money. If you’d like to do better financially in one of these or other areas this year, consider changing just one habit! That could be making impulse purchases, having just one income stream, using credit cards just for the points, spending on convenience or not following a budget. A lot of financial health comes down to our habits, so a small adjustment every day can make a huge difference.
Making impulse purchases
An impulse purchase is any purchase that isn’t planned. Impulse buying is usually tied to your emotions, like fear of missing out, urgency, boredom or even fatigue. Marketers take advantage of this, and that’s why you’ll see candy bars in the checkout aisle, for example. A shopper will feel the emotion, see the opportunity and buy the product or service whether or not they need or can afford it.
“To curb impulse spending, first, recognize when you do the action,” said Paula Pant, an expert on budgeting at http://thebalance.com. “If you reach for that magazine or candy at the checkout or the clearance item, force yourself to wait. Before pulling the trigger on a purchase, consider if you have the extra money to spend on that item and if you need the product. It will give you time to think about your decision, and chances are you’ll realize you don’t need it after all.”
Add a category to your budget specifically for impulse purchases. That way, if you see something you want and it falls within the budget, you can go ahead and buy it! Just be sure to stop short of the predetermined amount.
Having just one income stream
It’s important to develop a steady income stream. So, do your best at your job or work hard at your startup — but don’t leave it at that.
“You never want to be reliant on one income stream, or your full-time employer, or even one market, because the one constant in life is change and things are changing so rapidly,” said Grant Sabatier, self-made millionaire and author of “Financial Freedom.” “The best way to insulate yourself against that change is by having multiple streams of income.”
To diversify your income, you can start a side hustle, invest in real estate or stocks or even start a web-based business with online advertising. But be cautious.
“One question to ask ourselves before investing in something is: What is the main reason I am investing in this?” said Roger Merrill, managing director of Merrill Financial Associates Investment Strategies, a financial advisement firm based in Provo. “Our investing decisions should not be based on FOMO or trying to get rich quick. Investing based on principles can lead to success; however, building wealth takes time, discipline, and patience.”
Using credit cards for the points
Using your credit card for certain purchases seems like a no-brainer. Cash back and rewards are a great incentive to whip out that little card! But whether you’re using your credit card to pay for your mortgage or just a pair of shoes, be careful.
“Before paying any bill — whether your utilities, rent, mortgage or medical bills — always make sure that there are no fees for using a credit card,” said Megan DeMatteo, a money writer and editor at CNBC Select. “More often than not, there is a 2-3% processing fee that can negate any rewards you might earn. In this case, it’s best to use an alternative form of payment, like a check or a debit card.”
Spending on convenience
Sometimes, an unplanned stop at a drive-thru for dinner is just what you need on a stressful day. This is one example of a convenience purchase, but these expenses can really add up when you rely on them too much.
To avoid convenience purchases, plan ahead. Instead of ordering delivery when you have an unexpectedly busy day, take a weekend to prepare several freezer meals that you can pop into the oven for dinner. Instead of stopping for a pricey latte on your way to work, make yourself a nice cup at home. Planning ahead may take more time and money upfront, but what you save in the long run will be worth it.
Not following a budget
If you’re not budgeting, now is the time to start! There are many different budgeting methods you could follow, including incremental, activity-based, value proposition and zero-based. Whichever method you choose to follow, there are several benefits to keeping a budget:
- It keeps you focused on your long-term financial goals.
- It helps you avoid unnecessary debt.
- It enables you to save for retirement.
- It prepares you for emergencies.
- It helps you identify any bad financial habits.
- It gives you peace of mind.
If you’d like to do better financially this year, start by changing one habit! Make purchases deliberately, add an income stream, use credit cards wisely, plan ahead of time and follow a budget. Start now to make 2022 a financial year you can be proud of!