The world of personal finance is a complicated one. Often, people build a relationship with money based on their parents, television, or advice from their peers. This can lead to some unhealthy habits or poor uses of earnings. Over time, bad habits can sour your relationship with your finances.
This relationship with money can always be improved, but to do this you need to know where things went wrong. Sometime people gradually fall into bad behaviors with good intentions. Over time, this moves them away from longterm goals. Other times people make bad decisions early into their financial journeys and are left to deal with the ramifications for years.
Regardless of the ways people establish an unhealthy relationship with money, it’s important to regain control. Identify the areas for improvement and work to change your attitude. Not only will this reduce stress, it can have a great amount of financial gain in the future.
You Spend, Not Save
Just because you have money doesn’t mean you need to spend it. Many people adopt a mentality where they’ll pay their bills and the remainder goes toward fun and entertainment. This can leave you without significant savings and the potential to fall into debt.
It seems this mentality is often established as a young age, perhaps with your first part time job. When you’re in high school, it’s probably OK to take your $100 weekly paycheck and spend it on clothes and restaurants. Of course, it would be incredibly beneficial to start investing in your teenage years, but it’s not realistic for someone that age to have the foresight to invest. As you reach financial independence, you need to ditch the spending mentality.
Of course, you can still have fun. You need to make saving a part of your monthly expenses. Once you’ve made a contribution to your savings you can use the remainder of your money to have a good time.
You Only Pay in Cash
Many people hold a sense of distrust in credit cards, and some are even afraid of banks. While there are some reasons to be weary, you can earn a lot by using these services correctly.
Understandably, anyone with credit card debt will have a negative relationship with money and credit. Getting into debt can be easy. Getting out is a lot harder. After this type of incident, you may want to cut your cards and rely strictly on cash. That way you can’t overspend. While it’s true that you can only spend the cash you have in your pocket, there’s no other benefit to spending cash.
Even if you’re a newbie, there are great credit cards out there, and this will help build a strong credit score that will benefit you in the future. You can also collect cash back, rewards, and cardholder benefits. Of course, credit cards have potential to get you into debt. Just be sure not to charge more to your card than you can repay. If you’re making routine, essential purchases then credit cards are usually a wise choice.
If you’re not putting money in the bank, you’re opening yourself up for a lot of potential problems. Even if you’re comfortable keeping buckets of cash in your house, you should probably look into a high yield savings account. This allows you to collect interest while you’re saving money.
You Borrow More Money than You Need
Whenever possible, you should avoid loans. In America, we’ve come to accept student loans as a necessary evil when going to school. If you need these loans to pay tuition, then you should make an informed choice to borrow.
Sadly, many student borrow without making the informed choice. They will be offered a loan to cover their entire cost of attendance even though they don’t need all that money. Yes, pay your tuition, but do you really need the extra $10,000 for books, personal items, transportation, and food services? Universities will allow students to borrow funding for these things, but you should try to avoid using loan funding for expenses that aren’t set in stone. If you use loan funding to pay for a $5 coffee, you’ll probably end up paying $8 once interest is applied. On a grander scale, that can leave you with a lot more debt than you may realize.
College is a great time to learn to budget, and if you’re taking out loans you need to understand which fees are essential and which fees are negotiable. Even if you are taking out loans later in life, you need to understand your budget. Take out as little as possible, and pay the loan back as quickly as you can.
Your Savings Fluctuate Often
Savings should be used for one of two things: major purchases and investing for retirement. If you’re dipping into your savings every other month, you won’t see the progress you’re hoping to achieve.Young people may be tempted to using a significant portion of their savings for luxury expenses such as vacations, technology, or extreme monthly bills.
If you do this, you might start the year with $10,000 in savings. You contribute to your account monthly, but by the end of the year you only have $8,000 in there. Of course, you did go to Panera Bread each day, take a trip to Hawaii, and purchase the new iPhone. All of these things resulted in your savings dipping. By the end of the year you’ve spent more than you’ve saved.
Viewing your savings as a flexible spending account will derail longterm goals. It’s one thing to save for a necessity such as a car, new computer, or house. It’s another thing to justify poor spending habits because you have money in your savings account. Think of your longterm goals, or at least think of your life when you’re old and gray. Your morning croissant won’t be there, but that $3 could be multiplied by then.
You Think Money Makes You Superior
It’s common to see people associate money with power. Truthfully, some of the most powerful people are also the wealthiest, so it’s an easy connection to make. While having money may give you more opportunities, a change in attitude can be detrimental to your success.
Money can be lost easier than it can be earned, and one poor decision can leave you completely broke. Likewise, an accumulation of small efforts can leave you quite wealthy in a couple of decades. Flaunting money doesn’t prove you’re a powerful or intelligent person; it proves you’re materialistic and egotistical.
Continue to think of the longterm benefits of savings and investing. Don’t be distracted by someone who boasts about their wealth because they clearly don’t have the best relationship with money. It’s wiser to live a life that’s comfortable than one that’s flashy. This way you will be able to survive a financial hit without any negative impact on your self-esteem.
Build a Healthy Relationship With Money
As a rule, you want to be come financially conscious. If you educate yourself on the ways you can save money and spend wisely, you’re on the right track. If you do have an unhealthy relationship with money, it’s not too late to change your perception. In fact, your attitude change is free.
Payday should be an exciting time for you. It’s an opportunity to invest in your future and rid yourself of short-term debt. If you have a different attitude toward payday, you might need to reevaluate your relationship with money. This can take time, but it will be quite rewarding and stress-relieving.
Many people who have an unhealthy relationship with money should not blame themselves. They likely grew up in an environment that encouraged frivolous spending without longterm planning. You shouldn’t be hard on yourself if you had a poor financial past. Rather, focus your energy on improvements. Building a healthy relationship with money can become interesting and exciting, it’s just a matter of adjusting your attitude and investing in your knowledge.
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