8 Bad Money Habits You Need to Outgrow in 2022
1. Not having a written budget
Those who struggle with money management can benefit from diligently tracking their cash flow with a written budget. A written budget helps you determine how much money is coming in and going from your coffers.
If you’re not an expert in creating a budget, now is the time to start. Total your monthly earnings and then subtract your monthly expenses, which should include both fixed and variable expenses.
You’ll then start to see where you can make changes to suit your priorities and manage your money better.
2. Impulsive buying
Are you the type to buy something whether it's on sale or not, even if it wasn't planned? This type of impulse buying can lead to several risky spending habits such as justifying poor purchase decisions, losing track of your budget, and, worse, incurring debt.
While an occasional impulse purchase does not usually have a long-term impact on your finances, making it a habit can seriously derail your goals. Create a strategy to help you deal with the annoying urge to spend.
3. Spending more than you earn
Excessive or exorbitant spending that exceeds your monthly income sets you up for a financial deficit. Your goal should be to spend less than what you earn, allowing yourself to have a surplus for emergencies and ample savings.
4. Not monitoring your credit score
Payment history has a significant impact on your financial future. Your ability to pay your credit card bills on time consistently will be of huge benefit to your credit score.
If you’re able, do not wait for the due date before you pay your credit card bill to minimize the mistake of forgetting to pay it on time. Doing so will prevent your credit score from being affected, which can make taking out loans easier should you need to.
Otherwise, work out a payment plan with your creditor before things go awry.
5. Not setting aside money for emergencies
Emergencies can happen at any time. Whether it’s a car repair or a medical crisis, you should have a financial safety net ready to help you cover unexpected bills. Not doing so can put you in a situation that may be difficult to recover from.
A good practice is to save anywhere from 3 to 6 months’ worth of your income that you can use in your time of need. You’d want to keep your emergency savings separate from your other accounts, so you can't access them for day-to-day spending.
6. Using credit cards for points
Using your credit card is not inherently bad, but if you are mainly using it for the points you’ll earn, then you’re not spending your money wisely. There’s the risk of getting into credit card debt as your bills pile up. Buy only when you truly need something and not because of the perks credit card points will give you..
7. Getting carried away with lifestyle inflation
An increase in your income is certainly a good occasion to celebrate. You may now be able to afford more of the things you’ve been pining for but were just out of your budget. Think of it as lifestyle inflation.
In lifestyle inflation, every influx of cash is spent in a flash. Getting a raise or a better-paying job cannot significantly help your finances if you immediately increase your spending to match your new level of income.
While small lifestyle upgrades can be a good motivation to keep going with your financial growth, you should not get carried away with lifestyle inflation so that you won’t get trapped in risky financial situations.
7. Not planning for the future
We all dream of living in relative comfort in our twilight years, which is why savings and retirement funds are of utmost importance. These things help you financially prepare for major life milestones such as your children’s graduation or even your golden anniversary as a couple.
Understandably, you might find it difficult to look ahead when you’re barely getting by with your current finances. But it's critical that you do. Consider where you want to be in a year, then the next three, five, and so on.
The Bottom Line
Catching bad financial habits early on can help you avoid problems later on. With the next year providing you with a fresh start in life, it’s the perfect time to get your finances and investments in order through BPI AIA’s Build Life Plus savings plan. Build Life Plus can aid you towards your goal of financial wisdom.
Schedule a virtual appointment with a Bancassurance Sales Executive today to find out how you can manage your finances.
