Breaking bad money habits is difficult but if you have a strong WHY it can be done. Achieving this goal has positive consequences like huge growth in wealth, increased retirement savings, improved emergency fund savings.
It’s overly difficult to break bad money habits overnight especially if they’ve been developed over a long time. Start tackling them in a small dose, for instance, develop a budget and follow it, find an accountability partner. Practice gratitude and focus on the goal – that smart spending habit improves your financial wellbeing and prevents overpaying for your purchases.

Part two of 5 bad money habits series will critically examine the following bad habits:

• Not enrolling in employer-matched contribution programs
• Waiting to get more money before you start investing
• Living beyond your means
• Not having a rainy day fund
• Buying lunch every day at work

Classic Bad Money Habits

#6.Buying lunch every day at work

Have you critically analyzed your lunch habits of late? At work do you go out to buy lunch every day? On average daily lunch costs about $6 for fast food and $12 at a sit-down restaurant. It may seem insignificant, but if you examine the annual cost you’ll realize that it’s a big chunk of change that could’ve easily been saved.

Additionally, when buying lunch every day it’s very tempting when you’re low on cash to resort to using a credit card to pay for it.

Let’s examine how much lunch costs monthly/annually and how it impacts your budget:

• Average lunch costs $6 per day
• Annually it may set you back $1440
• Soda or pop costs $1.50 daily and annual cost = $360
• Total cost for drinks and food per annum = $1800

Sometimes you may have tight deadlines at work, therefore your team may decide to go out for lunch with colleagues to discuss the project.

Budget for social spending

Include a provision in your budget for play money that can be used a few times a month to avoid encroaching on the budget. As long as it’s not a daily occurrence then that’s fine.

When you bring lunch to work mostly it’s food leftover from last night’s supper so it’s coming from a grocery shopping budget. Therefore you’re not taking cash to purchase another item.

Here are the benefits of preparing work lunches at home 90% of the time:

• You make good quality, fresh, and healthy food
• Food is made to your liking
• You control what goes into it and stay away from unhealthy alternatives

The long-term cash savings of taking a bagged lunch to work are considerable. For instance:

• A $30 weekly savings can be automatically invested in mutual funds or index funds, which increases your net worth.

No doubt, it is critical to allocate fun money in the budget that can be used when required to go for lunch with colleagues for socializing. Some jobs especially desk jobs get very boring sitting down at the computer all day. Certainly, once in a while it’s sure nice to go out with colleagues for lunch for team building.

Top 3 apps to make your budget easier:

• Fudget. This application simplifies a process to build a budget that uses one-time and repeated expenses besides income. You record spending without the need to link it to your bank account.
• Mint. You create a budget by linking your bank account, credit cards, and mortgage to the app. You keep track of every withdrawal and deposit across all your accounts centrally. It’s more advanced than the Fudget app and both apps are free.
• You Need A Budget (YNAB). YNAB makes you spend within your income levels by using an integrated accountability partner to keep you on track. YNAB charges a small fee monthly or annually.

#7.Not having a rainy day fund

If there’s one thing for certain is that at some point in life an unexpected event will happen. For instance:

• Unplanned vehicle repair such as a flat tire
• Appliance malfunction for instance, as a Keurig coffee maker dying on you
• Unexpected dental bills

These little annoyances happen without notice and usually require immediate cash outlay to bring life back to normal operation. Most financial advisors recommend having saved up enough cash to cover three months of rent and expenses.

It’s very frustrating if you don’t have liquid cash set aside for a rainy day to meet such expenses. Therefore, you may have to resort to using credit cards and then pay more in interest costs in the future or ask to borrow from friends or family which is embarrassing.

How to establish a rainy day fund

This fund is strictly for unexpected and unanticipated events. It’s not for personal desires like shopping, vacations and going out for dinner out with friends.

• Start with the traditional savings mechanism of a piggy bank. Get one of those you can’t open without breaking
• Think outside the box, therefore, arrange a garage sale to sell your selling your lightly used clothing, shoes, and books as well as games just collecting dust in your household. They say one man’s junk is another man’s gold. You will be surprised by how many people show up to buy your stuff.

You can also list your stuff for sale on:

• Facebook buy and sell page in your city/town
• eBay
• Craigslist

Ensure all cash from sales should be deposited in a savings account for the rainy day. This account should be highly liquid and withdrawn within minutes or a day’s notice.

Also consider low-risk investments such as:

• Redeemable guaranteed investment certificate (GIC)
• Bond fund
• Money market funds
• Index funds that provide safety plus interest income

Finally, set up an auto savings plan because this will keep you from over-spending. Funds automatically move monthly or on a biweekly basis from your checking account into a high-interest savings account. A word of caution: leave these funds to accumulate and ensure they’re strictly used for emergencies.

#8.Living beyond your means

Living beyond your means is a sign that you’re spending more money than you can generate.

5 signs that you’re living beyond your means:

• Credit card balance is rising fast. If you’re only making minimum credit card payments monthly then your principal is not going down, therefore the balance is not dropping
• Yet to set up a budget
• You’re not saving money on every paycheck. It’s highly recommended to save a minimum of 10% of every paycheque for a rainy day fund or retirement investment. If you can’t afford 10% then any amount saved is still better and you can increase it when you get a pay raise.
• Not having leftover funds at the end of the month is dangerous since in life stuff beyond your control always happens. Therefore if you don’t have any cash o hand for unexpected events then you might have to make cuts for necessities to meet the unplanned expense.

If any of these situations apply to you then it’s about time you critically examine your lifestyle. Start by creating a budget for all your monthly expenses using apps like Fudget, Mint or YNAB.

Critically look at expenditures that can be cut for instance:

• Cable TV
• Magazine subscriptions
• Gym membership
• Newspaper subscription

Every item from the list should be critically examined in isolation. Obviously, if you determine that there are other means of getting it for free. For example, magazines or newspapers could be read at a public library making it the easiest to drop from the budget and the cash saved from subscriptions could go towards children’s education savings or debt repayment.

Admittedly, doing cuts right now can significantly change the course of your financial future and therefore increase your savings leading to high net worth.

#9.Ignoring enrolling in employer-matched contribution programs for registered or non-registered investment accounts

Admittedly, you’re giving up free money from your employer’s contribution if you’re yet to join company’s matched contribution program.
Most employers offer a matched contribution program for registered or non-registered saving plans like:

• 401K. Tax-deferred contribution
• Roth IRA. After-tax contributions and can be matched by the company
• Tax-Free Savings account (Canada). After-tax contributions and company can match it.
• Registered Retirement Savings Plan (Canada). Tax-deferred contributions

For the most part, eligibility is attained right after a probationary period ranging from 3-6 months of continuous employment.

• By not enrolling in the program you’re leaving free cash on the table. For instance, for a participant in a matched contribution program, the policy may stipulate that for every 50 cents you contribute, the company will match it.

Does your employer offer a matched contribution program? If it does and you’re yet to sign up it’s highly recommended you do so at your earliest convenience. Because once you’re enrolled every penny saved towards your retirement savings is matched up to a stipulated limit.

In this situation, if you stay invested in the program for a long while it will speed up your investment or savings growth. Especially if you elect to purchase the company’s common stock that has experienced tremendous growth over the years.

#10.Waiting to get more money before you start investing

Not starting to invest with the little you have is a poor financial decision. You need to stop deluding yourself that you will start investing later when the following happens:

• Your income doubles
• Experience low expenses
• When you get married
• Get a better job

Don’t forget that as your income grows so will your needs. A cardinal rule of investing is to start early and continue investing consistently in order to increase your net worth or build up a fair nest egg.
Keep it simple and start with a small preauthorized contribution like:

• $25 bi-weekly
• Auto-invest in a balanced mutual fund
• Review after 6 months. If you can stretch your budget consider increasing the auto-contribution to $50 biweekly.

Suppose the fund returns on average 4% annually then you’re beating inflation. Stop procrastinating and start investing to create an asset that you can fall back on when you experience a temporary financial difficulty.

In conclusion
Admittedly, habits can be learned and unlearned. For one thing, our parents, the environment we grew up in and the education system have had a hand in influencing our habits. Bad financial decisions have a huge impact on our financial future.

Finally, in order to achieve financial freedom – you have to break bad spending habits, a dollar here and a there may seem not a big deal but it adds up. Start small like cut the cord, reduce expenses such as magazine subscription, frequency of eating out from three times to once a week, bag lunch to work. Minimize debt and always save for the future. Take a bold step to unlearn bad money habits and your life will be happier.

Don’t wait to get more money before you start saving. Change in behavior is certainly a good place to start to form good money habits.

Related Article5 Bad Money Habits and How to Stop Them-Part 1

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