6 Bad Money Habits Affecting your Savings
Have you decided to take your financial life seriously? You probably need to start paying more attention to money management.
Money management refers to how you handle all of your finances, from budgeting to investing, to saving and setting goals.
The importance of saving money in Nigeria cannot be over exaggerated.
While it is considered as a path to financial freedom, other benefits of saving money include the peace of mind it brings, a secured future and the ability to meet your life’s goals among others.
Money management, on the other hand, is guided by certain principles which, when followed, can help you put a check on the bad money habits affecting your savings.
There are several principles that can guide you through properly managing your money.
Some of them are listed below.
● Spend less
Spend less than you earn. Of course, it’s easier than it sounds but it’s doable. Today’s world is driven by consumerism, and this comes with constant advertising bombarding our social media space.
To be able to grow your wealth, you must adopt the habit of spending less than you earn and only spending money on necessities like food and utilities.
● Avoid debt
Stay away from borrowing. Debt always mortgages the future. Money you ordinarily should save will go into paying off interests on debts.
As much as possible, stay away from loans, except it becomes absolutely necessary.
● Consider budgeting
Having a monthly budget will help you prioritise your expenditure while whatever is left goes into your savings.
The golden rule of planning your monthly expenditure is the 50/20/30 rule of budgeting.
This rule stipulates that you split your income into three categories of spending.
50% goes for your needs, 30% is for your wants, while 20% goes into your savings.
You can adjust the figures according to your capacity or the number of your dependents, but the important thing is to stick to your own rules.
Importance of saving your money
There are many reasons why you should save money, but perhaps the most important of them is the security it adds to your life.
If you have cash set aside for emergencies, you have a fallback should something unexpected happen.
Other reasons why you should save money include.
● Financial freedom
Money gives you the freedom to do what you want, spend on what you desire and make more room for relaxation in your life. This can mostly be achieved when you are intentional about saving money.
Without savings, you may feel stuck in a particular situation, especially if you highly rely on a pay cheque. But with savings, the scenario is totally different as funds for emergencies and contingencies are set aside.
● Calculated risks
Saving money gives you the opportunity to take calculated risks without relying on your salary.
If you set a savings goal and contribute regularly to your savings each month or at frequent intervals, you can explore a whole new range of opportunities.
For example, if you have grown your savings to a certain level, you can trade in the stock market, or start a new business.
● Reduce stress
Savings are surely one of the most important factors in leading a stress-free life.
Knowing that you have gathered a certain amount of funds gives you a sense of relief and peace of mind. By saving money in a disciplined manner, you are confident that your long-term and short-term goals can be achieved.
● Extra income
Saving money gives you more money. Among the various benefits of savings, one of the biggest benefits is that it allows individuals to utilise the power of compound interest.
Most mobile savings apps offer a high Annual Percentage Yield (APY). If you start saving now and invest it in the right avenues, you can start seeing impressive results.
● Meeting life’s goals
If you intend to meet your life’s goal with ease, saving money would be your best bet.
Your goals could be getting a higher education or an added degree, taking that foreign trip, or purchasing a home.
Bad money habits affecting your savings
Saving money is not always a smooth ride, but it can be, if you discipline yourself. It takes a lot of commitment to be able to set some money aside periodically, especially with an economy in recessio.
Bad money habits will affect your savings and most likely prevent or delay you from reaching your target.
In addition to a lack of discipline, other bad habits affecting your savings include.
1. Not budgeting
Budgeting is the best way to monitor and better understand your spending habits.
Knowing where your money goes and where it comes from can help you keep track of your spending.
Calculate your income and expenses and set goals for yourself to help keep you on track and on target. Closely observe your spending habits to see where all your money is going.
2. Impulse shopping
Making unplanned spending decisions is one habit that can affect your savings. These poor spending decisions can add up quickly and cause you to run out of money fast.
The more you spend on non-essential items, the less money you have left for essential items.
It may seem like a great deal, but if it is not budgeted for, let it go.
3. Paying bills late
As much as possible, pay your bills before they are due. Whenever you pay a bill late, you risk facing rate increases from the vendor.
If you pay your bills early, you won’t have to worry about forgetting and incurring late fees.
Set up automatic payments for all your important bills so you never have to think about them again. You should also make it a goal to pay a bill as soon as you get it.
4. Living above Your Means
Like impulse spending, living above your means can put a serious dent in your finances if you aren’t careful.
You don’t necessarily need to be frugal, however, you should steer clear of expensive and unnecessary purchases like new cars, luxury apartments, and fancy vacations if you’re still trying to get your financial footing.
This doesn’t mean you can’t treat yourself every once in a while. Just try to make it work within your budget.
5. Borrowing
Taking multiple loans is regarded as counterproductive for one who is committed to their financial freedom.
Personal or payday loans are great for emergency purchases, but they also make it far too easy to fall into the borrowing cycle.
6. Not saving when you can afford to
There is the common belief that only people with surplus cash save money. But this is not true. If anything, saving is for those who intend to break out of the cycle of never having enough cash.
Failing to prepare for unexpected events is one of the most common bad money habits to break.
Paying yourself first by saving money before you spend any money is the best way to protect your finances and reach your goals.
Ready to take your savings seriously? Visit nairaCompare to compare interest rates on different savings accounts and find the one that best suits your needs.
