Once we make our own money, it’s easy to fall into the trap of bad spending habits. Most people have the misconception that if we just have enough money, we can buy whatever our hearts desire. On top of that, there are the numerous advertisements we see, the allure of instant gratification, and the need to stay updated with trends. Ultimately, these habits can affect our economic wealth and hinder our path toward financial independence.
In this article, we will look at the money habits that can keep anyone broke and how you can break them to achieve financial success.
Spending too much money on unnecessary things, constantly upgrading your lifestyle, and not knowing about interest rate factors can fuel toxic money habits. Here are some bad habits that could make you bankrupt, and see if you’re guilty of doing them:
Your spending habits can spiral out of control if you don’t have a budget plan. It will cause people to waste money on things as trivial as soda and as large as the latest television model. What’s more, not having a budget plan can leave you short on essential bills such as your electric bill or your children’s tuition.
Leaving the house to eat out with friends or alone regularly can also feed bad budgeting habits. A meal can cost from a hundred to a thousand pesos, which will bankrupt you if you do this constantly. Add to that the rising cost of goods and services, which keeps meal prices higher than ever.
Buying Coffee Everyday
Coffee lovers might be guilty of this, but it’s a reality. Buying coffee daily instead of brewing your own leads to massive weekly spending. In fact, coffee in the Philippines is the 46th most expensive in the world. So, let’s say you drink coffee daily, and each coffee run costs you P150. In a week, that’s already P1,050; in a month, that’s roughly P4,020. If you already have coffee beans at home, spending thousands of pesos on a cup of joe may not be wise.
Getting Groceries Without a List
Grocery shopping is a fun adulting experience. However, if you find yourself paying for a week’s worth of groceries that cost P20,000, it wouldn’t be as entertaining. Can that happen in reality? Well, yes. It can happen, especially when you don’t have a grocery list. This bad spending habit can lead to putting everything you want in the shopping cart and feeling guilty about your purchases.
Making Hasty Purchases
Constant impulsive purchases are a money habit that can keep you broke. A person’s tendency to purchase goods and services without planning elicits strong emotions and feelings. They might feel happy with their purchases, but it will make their wallets somber as it is not part of their spending plan. One such example is submitting to peer pressure. People who fear missing out on something like a concert with their friends can make hasty money decisions.
Lacking Medical Insurance
Medical fees are expensive in the Philippines. An unexpected accident can leave someone with hundreds to millions of hospital bills if they don’t have medical insurance. Doctor’s consultations are also expensive these days, and if you are a sick person without medical insurance, every doctor’s appointment will be costly.
Not Having an Emergency Fund
Emergencies are unexpected, but if you don’t set aside funds for them, it will hurt your wallet in the long run. Did you know? Emergency room fees in the Philippines can cost anywhere from P5,000 to P10,000, excluding the hospital’s miscellaneous fees. If you don’t prepare for scenarios like this, it can get you broke in no time.
Spending Money on Subscription Services
Netflix, Disney+, HBO Go, and Amazon Prime Video are some streaming services available in the Philippines. Each streaming app has different monthly and yearly subscription prices, ranging from P149 to P2,950. There’s nothing wrong with subscribing to these streaming services. However, it’s a lousy spending habit to subscribe to as many as possible and not use them. It’s pricey and will leave you strapped for cash down the road.
Living Beyond Your Means
There’s no shame in aiming for a higher standard of living. That’s why we work—to be able to afford stuff. But if you live beyond your means, that’s a poor financial decision. For example, spending too much on housing expenses beyond your monthly salary calls for bankruptcy. Going out with friends or treating yourself every time you get paid is a surefire recipe for financial ruin. Raising your standard of living or occasionally treating yourself is okay. However, constantly expanding your budget and spending can make you run out of money just as fast, even if your income increases.
Purchasing Due to Brand Loyalty
Sometimes, when we buy things, we prefer a certain brand because we’ve already tested and trusted their products. Some of the products you want for a particular brand cost more than others or unbranded ones, leading to bad spending habits. For instance, Apple is a well-known brand for every gadget you can think of. Since it’s so popular, its products are much more expensive, so you’re paying for the brand, not the product you want.
Having Credit Card Debt
Credit cards are easier to obtain now that underbanked individuals have access to loans thanks to alternative credit data. However, not paying your credit card debts racks up your expenses. And it will ultimately let you go broke. If you fail to pay on time, you will incur penalties that will increase your overall cost.
Now that you’re aware of the potentially harmful spending patterns, check yourself. Are you doing some of them or all of them? If you do most of it, then it’s time for a change. Begin practicing self-control and follow these tips to safeguard your finances:
Make a Spending Plan
Creating a spending plan is one of the most important ways to break bad buying habits. Control how much goes out of your pocket. Set up a weekly or monthly budget limit. Then make a list of your expenses and prioritize them. Consider which expenses are the most important to you and which can wait until your next paycheck.
Make a Meal Plan
Lessen your eatouts and go for meal plans. Cooking your food is cheaper than buying takeout or eating out regularly. It will save you money, and you’ll have more funds to spend on other essential things.
Think About Every Purchase
Another money management tip is to consider every purchase you make. Yes, you make money, but that doesn’t mean you can buy whatever you want. For instance, determine whether this new phone you desire is something you truly require or something that will simply make you happy. If you need a new phone, go for it, but if your current phone is still working perfectly, you might be able to hold off and save more so that it fits into your budget.
Keep Away From Unexpected Costs
Fight the urge to make impulsive purchases. This ties into carefully thinking about your financial decisions. Lessen window shopping, either physically or virtually, as these may increase your desire to buy unnecessary things.
Save Money on Utility Bills
As you create your budget plan, carefully consider where you’ll spend your money. One way to stop bad budgeting habits is to save on utility bills. Utility expenses are constant, so you should always have enough money to spend on them. This will also prevent you from falling short on the monthly bills.
Invest in Yourself Financially
Another way to gain financial control is to invest. Investing in yourself financially indicates that you value yourself. Putting money toward things like real estate, a business, or other opportunities for oneself is essential. So, to ensure your future financial security, think about starting a savings account or investing in life insurance.
Maintain a Healthy Credit Score
Improving financial well-being and maintaining a healthy credit score is another way to break bad spending habits. To do this, avoid having credit card debt. Pay your bills on time and protect yourself against fraud. Fraudulent activities can badly hurt your credit score. Fortunately, some financial institutions use fraud analytics software to spot fraudulent account activity. This will assist you in keeping track of your finances and preventing further losses due to fraud.
Each person has their own unique path to financial independence. It could refer to reaching a certain income level, buying a house, or eliminating all debt. But one thing is for sure. We can achieve financial freedom if we know how to break bad spending habits. So, keep these spending patterns in mind. Assess yourself, consider your weaknesses, and take our advice to heart to overcome them. All of these will get you closer to your goal of financial independence over time.
Do you have more questions about toxic money habits? Contact us today, and we’ll be happy to answer your queries.