Are you looking for personal finance tips that will help you improve your way of life? It seems that we are all preoccupied with it. When we were young, we were encouraged to study hard so we can go to a good university. To get to college, we are forced to get student loans so we can improve our potential to earn. And once we graduate, we spend hours working just to earn enough money to help us buy the things that we think can make our lives more comfortable.
When you put it that way, it seems like a pointless way to live our lives, right? But you know that in this consumerist society, money and possessions are important. We need money to buy the possessions that will make our lives more comfortable and convenient. While that is true, it does not mean we have to succumb to the usual cycle of life. Why not aim higher by striving for financial security?
This is a type of financial situation wherein you are well provided for at present while having enough for your future. We don’t know what the future brings so we have to be prepared for the eventuality that your source of may or may not expire before you. We are not only talking about retirement. We also mean the possibility of you getting too sick to work or another economic crisis that leaves you without a job.
When it comes to being financially prepared, the statistics are not that good for the average American family. According to the data compiled by StatisticBrain.com, only 38% of Americans have an emergency fund to financially support them when tragedy strikes. With an average household debt of $117,000 and more, this can put a lot of consumers in a very vulnerable position. Some people are living from paycheck to paycheck and are one emergency away from financial ruin. You do not want to be a part of this statistic so why don’t we discuss the habits that will lead to your financial demise?
8 financial habits that will keep you from a financially stable future
Financial security is not something that happens overnight. You need to work hard for it because it requires you to build up enough funds to help prepare for your future. Not only that, you also have to develop certain habits that will help you maintain stability in your financial life.
There are many conditions to have financial security and it all begins with the habits that you will develop. The usual habits include budgeting, saving and making smart choices when it comes to our spending. But it also involves a lot of habits that we need to stop doing. Some of them are more difficult to change than the others because we have grown accustomed to implementing them in our lives.
We have listed 8 of the most popular habits that we all need to change in our lives. If you find yourself guilty of committing any one of these, then you know what you have to change in order to achieve financial security. Here are the 8 habits that you need to stop doing.
Spending your money based on a future paycheck. This is your mindset whenever you purchase something with your credit card. A purchase done through credit is your way of committing your future paycheck on today’s purchase. Whenever you add more to your credit, remember that you are setting yourself up to keep on working just so you can pay for past purchases that no longer have any meaning to you. You have to stop this habit and just save for purchases that you want to have. That way, you will be working for the future, not the other way around.
Applying for too many credit card accounts. Credit cards have their uses but financial security is not one of them. If you want to be financially secure, you have to keep the temptation to use credit low. Limit your credit cards to one or two – only what you really need. And you also have to be very careful about how you use them.
Not minding overdraft fees. Before you issue a check, make sure that it has a fund. Do not waste your money paying overdraft fees. Instead of saving it to make yourself rich, you are adding to the wealth of your bank. Be wise about your money and always double check your accounts.
Failing to organize your bills. This seems like a small thing but it is a major cause of late payment fees. If you fail to pay your dues on time, it can prove to be a problem. Just like overdraft fees, you will be wasting your money paying these fees. If you only organize your bills and put your financial affairs in order, you won’t have to miss out on any payment.
Using your home’s equity to pay for your debts. While it can be a great option to get out of debt, this can be dangerous too – especially when you are using it to pay for unsecured debts. In most cases, people borrow against the equity of their home to pay for their high-interest credit card debts. While it will help you convert your debt into a low interest one, you are putting your home in danger. Your home can be one of the possessions that will bring you financial security – but only if you own 100% of its equity. If you fail to pay the home equity loan you got, you might lose this important property.
Tapping into your 401(k) to pay for debts. Another option that people mistakenly use to pay for accumulated debt is their retirement fund. This is another wrong move. The money you deposit on this fund is your pre-tax income. When you borrow from it, the amount you will take will be taxed. When you return it, you have to pay for it with post-tax money. You are wasting too much money with the taxes. When you withdraw that money during retirement, it will be taxed again.
Avoiding the “money talk” with your partner or spouse. This is not directly a threat to your financial security but it can ruin your relationship. Financial discord is one of the leading causes of divorce and we all know how expensive that can be. If you have financial difficulties, it is best to communicate it with your partner or spouse as soon as possible. That way, you can both work on solving it.
Keeping your savings low, or none at all. Your savings is one of the most important aspects of your life that will guarantee your financial security. You need to make sure that you have enough money stored for possible future expenses that you may need. So make sure you know how to budget and save money to allow yourself to grow your reserve fund.
3 reasons why it is difficult to achieve secure finances
If you look at the habits that we just mentioned, they seem easy to get rid of and thus make financial security a more attainable goal. But it may surprise you that a lot of Americans are far from achieving a financially secure lifestyle. Here are three reasons why.
We spend more than what we earn.
An article published on BusinessMirror.com revealed that consumer spending increased in December by 0.4%. However, the income did not grow at all. That means we grew our spending while our income remained the same. If you want to improve your financial life so you can also improve your life in general, then you have to mind what you spend on.
We have too much debt.
According to the FederalReserve.gov, consumer debt in 2013 steadily grew from $2.9 trillion in quarter 1 to $3.1 trillion in quarter 4. Debt has no room in a financially secure life so you have to stop acquiring debt – or at least take control of it. Unless you really have to, we advise that you keep yourself from more debt.
We lack financial education.
Lastly, we still lack financial education. Believe it or not, we still have a lot to learn about money management. You cannot ignore this education because it will help you make the right decision about where you want your money to go so it has the best potential to benefit your future.
Think about all of these so you can hope to gain financial security in your life.