If you can pay your bills—without charging so much as your Netflix bill to your credit card—and still manage to sock away a few bucks every month into savings, you’re ahead of the money game in a lot of ways. But you could be still be sabotaging your ability to grow financially with bad money habits you don’t even know you have.
“By nature, habits are so ingrained in our brains that we don’t even realize we’re constantly repeating them,” commiserates Elle Kaplan, finance expert and founder of LexION Capital. “To make matters worse, it’s incredibly difficult to see how tiny day-to-day spending routines can impact our long-term success. But money is tied to almost all of our decisions, and it’s those minuscule daily choices that can snowball into large financial success or failure.”
With that in mind, our experts are here to show you the habits that are hurting you financially—and how to break them.
1. You have to have it now—so you pay for it later.
Many of us whip out credit cards any time we want a latte, a tank of gas, or even a concert ticket—small items that end up costing us big when we don’t pay off our credit card bills in full. “The ‘gotta have it now, pay for it later’ mentality is beyond tempting, and it can lead you into serious trouble before you know it,” warns Kaplan. “The exorbitant interest rates on credit cards can innocuously dig you into a debt hole that’s almost impossible to escape.”
Kaplan recommends treating a credit card as a financial tool, not free-for-now money. As a tool, “a credit card is a great tool that can build your credit score—which is extremely important—and can also offer rewards like airline miles or cash back,” she says. But you only reap those big benefits—without the drawbacks of sky-high interest rates—if you pay off your bill in full, every single month.
Of course, if carrying around a credit card is simply too tempting—if you just know you’ll charge more than you can afford to pay off in any given month— it might be time to take the cash-only route. Consider the envelope method, suggested by Wendy Liebowitz, vice president of Fidelity Investments’ Fort Lauderdale Investment Center. Grab several envelopes and label them for every extra cost you might incur in a given month—think: dining, shopping, and entertainment—and put the amount of money, in cash, that you’ve decided you can afford for each category into its respective envelope. Once your envelopes are empty, you’re done with those discretionary costs for the month.
2. You haven’t been to the gym this year.
Your new year’s resolution was to get Kayla Itsine arms. But it’s August, and you haven’t walked into the gym since you signed up for its costly monthly membership program. “That monthly charge is sucking your wallet, but is it sucking inches off your waistline?” asks Liebowitz. If you’re not, it could be time to cancel it—and stash the money you’d save.
Liebowitz suggests making a commitment to hit the gym with a friend who will help you put that membership to good use. Or, ditch the membership altogether, and opt for a more cost-effective workout option: “You could meet that same exercise buddy for a walk around the neighborhood, or to play tennis or basketball, which may not require a hefty monthly expense,” she points out. “Just be honest with yourself about the number of gym visits you’re really making to determine if a monthly fee is the most economical workout option.”
3. You don’t think you can (or should) invest.
“Especially when you’re young and strapped for cash, it’s easy to shy away from investing,” says Kaplan. Plus, let’s be honest: It seems like we can’t turn on the nightly news without hearing some doomsday prediction about the next stock market crash. “You might be led to believe that any excess cash is safer sitting in your bank account than the stock market,” she says. “But the truth is inflation is eating away the power of every dollar you leave sitting in your savings account annually.”
If the stock market scared you, look at the long-term value and risks involved with investing your money—not what, say, Apple’s stock did in the last 24 hours. “The stock market might seem scary and too risky to put money into, but if you look at its performance over 10 or 20 years, you’ll start to realize the immense value of having your wealth grow over time,” says Kaplan.
Then, prioritize investing the same way you prioritize necessary spending. “An easy way to do this is by setting up a Pay Yourself First Fund,” says Kaplan. “Aim to set aside 20 percent of your budget toward investing in your future self—whether that’s paying down credit card debts or investing for retirement. Treat this as a non-negotiable luxury, and realize it’s just as, if not more, important than paying your bills.”
4. You haven’t cooked this month.
Whiling away hours at a restaurant may be your favorite past time, but eating out often can seriously eat into your budget. Consider that the average cost of a home-cooked meal is just $4 per person—less than even your favorite and relatively cheap Chipotle burrito. But it’s not just fancy meals and take out that bomb your budget—even happy hour drinks at half-price can add up. “If you partake in alcoholic beverages, have a drink at home before you pay for pricey cocktails at a restaurant,” Liebowitz suggests. Or better yet, build up your cash reserves by cooking at home, even just once a week to start.
5. You spend money when you’re emotional.
Kaplan says it’s far too easy to tie your emotions to your spending habits. What does that mean, exactly? “You just had a bad day, so you go buy a pair of dress shoes to feel better,” she describes. “Or, you just got a raise, so you celebrate by going over budget. There are plenty of sneaky ways our moods cause us to overspend. And this can evaporate any steps you’ve taken towards financial health in a snap.”
To counteract your impulse to spend when you’re stressed or celebrating, consider building a 20-30-50 budget plan. In this plan, 50 percent of your money should go toward necessities. Then, “after devoting money to future endeavors, 30 percent of your budget can then go toward reasonable splurging,” says Kaplan. “As long as you can account for the rest, you can treat yourself with this portion. If you find yourself falling short on the plan, this is the section where you should trim some fat.”
6. You’ve got lazy gas habits.
When it comes to our gas tanks, we often play defense, scrambling to find the nearest station—no matter its advertised price per gallon—when our gauges teeter dangerously toward empty. Of course, even if you’re refilling responsibly when you’ve got half a tank to go, you may visit the corner store or the station on your route to work. Either way, chances are, you’re not searching for the best deal.
“And you could very well be saving more on the price per gallon by going to a different gas station,” says Liebowitz. “There are apps like GasBuddy that can tell you where the least expensive gas stations are near you, which can save you money to allocate elsewhere or better yet, to save and invest.” Then, plan your errands to reduce any unnecessary driving that will eat up your gas.
7. You’re focused on today, not tomorrow.
No matter the habit, it’s sometimes hard to see how it will impact us down the line, “so it’s not surprising that retirement is swept under the rug for the majority of Americans,” says Kaplan. “But what most Americans don’t realize is that retirement gets exponentially harder to plan for the more you put it off. By starting now, you’ll have decades to see your small investments grow into a gigantic nest egg.”
An easy way to start saving for your future is to invest in your company’s 401k plan. “This can be automated so a portion of your paycheck goes straight into the investment—a foolproof way to plan for retirement without even thinking about it,” says Kaplan. “As an added bonus, if your employer offers a match, you’re essentially getting free money to grow your nest egg.” Of course, if your company doesn’t offer a match or even a retirement plan, you have other options, like a Roth IRA, where your contributions will grow—and can be withdrawn at retirement age—tax-free.