What is the 2022 money expenditure that makes you recoil in shame and regret? Okay, it may not be that extreme, but some unhealthy money habits cost you extra and prevent you from meeting that critical financial goal that you are working towards.
According to financial experts, the first step to ditching unhealthy money habits is identifying and acknowledging them. You might be doing something detrimental to your finances, but you need to know how harmful it is to see the necessity of weeding it out.
Let's explore some bad money practices you must leave behind as you enter the New Year 2023.
Personal finance experts say the first step to money success is knowing where every coin goes. And if you have yet to regularly track your expenses in the past year, then it's a habit you have to leave behind as you enter into the New Year.
Consistently checking and monitoring your expenses makes you accountable and responsible for every money expenditure, however minute. There are various reasons and advantages to tracking your finances. For example,
Read Also: 8 Amazing Benefits of Tracking Your Spending
You may not thrive financially because of overspending and exhausting your funds before your next paycheck. Spending more than you can afford has negative implications, including limiting your future spending abilities.
But it can be more serious than you could ever imagine. Most over-spenders will not hesitate to dip into their savings if any. They will also stop at nothing to borrow or use credit/mobile loans to quench their thirst for more money.
Soon you might deplete your savings or reach your borrowing limits and run out of options to find the money.
The solution is to minimise your spending to live below your means. Any extra money you get should go towards settling existing debt.
Do you borrow to settle your outstanding debts and bills? While debt refinancing and consolidation can take the pressure off your shoulders, you need to be careful not to fall victim to a vicious debt cycle.
Meanwhile, a money habit that might have caused you more headaches is letting your debt accumulate. Many people amass huge personal loan debt and other borrowings that can be difficult to repay all at once because of the high interest that could reflect each successive month.
To break out of this debt cycle once and for all;
Instant gratification after that massive purchase can never augur well for your finances. One of the reasons for piling debt and unmet financial goals is impulse buying. Experts say it is easy to break this habit with strategies such as the 30-day rule.
Give yourself 30 days to think about something you want to buy. By the end of this time, if you still want the item, you can purchase it.
However, most times, you might realize you do not need it. You might even have forgotten, enabling you to stay on the straight and narrow of your financial expenditures.
Recent research states that many Kenyans do not consider an emergency fund a priority. Yet most of them grapple with frequent unexpected costs, which an emergency fund would easily help handle.
Think of that unexpected travel or a sick child. If you had some safety net stashed away, you wouldn't face the usual financial stress in the event of challenges.
An emergency fund's usefulness is that it prevents you from spiraling into debt. It's your fallback plan, giving you room to navigate the unexpected comfortably. It is easy to start building your rainy-day fund in the New Year. For example:
If there is anything that comparing yourself to other people can do, it is to steal your happiness, joy, and sanity. Comparisons lead to many people spending most of their time, money, and effort to keep up with the Joneses. The comparison trap has many other negative implications, including:
How do you stop the comparison game in the New Year? It's simple:
Wealth is health, and so is the necessity for affordable health insurance. Looking back, you might quickly agree how an illness can strike when you least expect it.
It could also be that time of the month when being broke is your middle name. You might also grapple with how expensive it is to fork out money for a simple ailment.
Most health insurance in Kenya, including NHIF, covers you against the risk of various medical conditions and illnesses.
Having health insurance means:
Lifestyle inflation/creep is an undesirable money habit you have to drop before you skip into the New Year.
5If you have had a consistent pay raise over the years or months, your utmost desire might be to overhaul your living circumstances to match your increasing income.
While it might take time, you might gradually want to acquire a bigger house in a more suitable environment. You could upgrade to an even bigger car and change your circle of friends.
The problem with lifestyle inflation is that your income will rise, but your savings might remain stagnant. You may dip into your savings to sustain that luxuriously costly lifestyle. To get out of this money-pinching trap,
Savings play a crucial role in achieving your financial goals. The more savings you have, the surer you are of a better and more comfortable future.
A practical plan is a key to making any savings journey possible. A few tips include:
The best thing you would ever do for your finances is to consciously ditch bad money habits at the close of 2022. Of course, some patterns are so deep-rooted that it takes effort, determination, and patience.
But the willingness to change is a massive step in itself, and soon, with baby steps, you will be on the right track. Finally, do not beat yourself up when you fall off track. Dust yourself up and keep going with the right money choices.