Curing Bad Spending Habits

Most of us have at least a few bad spending habits whether we are inclined to be spenders or savers.
In many cases, a lack of experience with daily costs of living leads to a certain level of volatility, which makes steady savings difficult.

What follows is a review of some of the worst, but most common, spending habits that screw up people’s financial lives. Check your own habits against these patterns. Pay close attention to the solutions discussed and take control.

Buying on credit is probably the worst habit you can have. If you have it, you shouldn’t feel alone. American consumers have more short-term, unsecured debt than any other group on the face or in the history of the planet.

People who avoid using credit are sometimes seen as cranks or eccentrics people who aren’t willing to play by the conventional financial rules. But there’s a lot to be said for avoiding revolving consumer debt.

Borrowing money to buy things that lose value over time means you lose twice once in the interest costs of borrowing the money and twice in the lost value (depreciation is the accountant’s term) of the thing you’ve bought.

Consumer lending is designed to lull the consumer namely, you into a false sense of financial security. That’s why Circuit City, Bloomingdales and Nordstrom are happy to issue store credit cards. But credit cards are the worst form of borrowing.
Once they’ve encouraged you to spend beyond your current means, they charge you anywhere from 15 to more than 20 percent interest.

Break this habit by not buying anything on credit except your education, your car or your house. Everything else should be paid in cash or paid off when you get the credit card bill.

Keeping up with the Joneses is another bad habit. Thanks to a natural competitive instinct and billions of dollars spent every year by advertising geniuses,we have been brainwashed into judging ourselves by whether we have the same material goods as our friends.

This is the familiar rat race of consumption more money to support a fancier lifestyle which then requires even more money. And that word lifestyle doesn’t just mean buying fancy cars and beach houses. It applies to just about anything: the amount of time you spend on the Internet; the number of times you see your favorite band in concert; the food you eat, booze you drink or clothes you wear.

Keep your mind on the long-term goal: Building and maintaining wealth that will last for generations after your gone.

Buying without goals is the bad spending habit that even careful people can suffer. For many people, making a good salary or inheriting some money means feeling that they have to spend it to show they’ve got it. This is the flip side of the debt problem and a variation of the status issue.

Rethink your personal and financial goals. In other words: Start saving more. In an economy that laughs at old notions of career stability, no one is doing well if the main source of income is a salary.

Most people are fairly average financially that is, they don’t make that much more or that much less money than other people their age. It’s just that some people are better at using their money to reach their goals.

What should your goal be? Go back to your monthly detail and look at how much money you put into savings. Is it 15 percent of your income? It should be. If it’s not...there’s your goal.

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