Poor financial spending behavior can drain your money without you even realizing it. On the other hand, if you are disciplined with your expenditures, you can easily hit your savings target each month and will never run out of money. So, if you are worried about not saving enough money, you should immediately tweak your spending behavior and fix these 5 common mistakes that are costing you a lot of money.
Frivolous spending is one of the main mistakes you should fix if you want to put your finances in order. Frivolous expenditures include dining out frequently, buying movie tickets, gadgets, and any other things that you don’t really need but spend for the sake of entertainment. These types of expenses may seem small, but they can become a significant amount when you add these expenses at the end of the month.
You can fix frivolous spending by recording your expenses in an app, which will give you an idea about your total spendings on leisure and impulse buying activities. It is better to set up limits and budget your expenses on leisure activities so that you don’t breach those limits and attain your savings target each month.
If you need to borrow money to buy something, you should postpone that purchase unless you are able to finance it with your own money. Borrowing money to finance your purchases is another bad spending habit that you need to get rid of as soon as possible. Not only will you incur interest charges on your borrowed money, but you can fall into the debt trap if you continue the habit of taking loans to buy items.
The best way to fix the habit is to refrain from taking loans and start saving money for your big purchases each month. You will save money on interest charges by using your own money for purchasing instead of the borrowed money.
Credit card companies encourage spending by giving reward points on using your credit card for your purchases. You can easily get trapped and end up spending too much on needless things as you don’t have to pay upfront for your purchases. However, if you don’t pay the outstanding credit card bill in full, you will be charged exorbitant interest charges, which can badly hit your finances.
To fix the mistake of the excessive use of your credit card, you should limit credit card use to your essential transactions only. And whenever you use your credit card, you should always pay your outstanding balance in full to avoid high interest charges. Always avoid withdrawing cash through your credit card as you will be charged interest starting from the moment you withdraw your cash.
Budgeting allows you to stay within your specified spending limits and save some money every month to achieve your short and long-term financial goals. However, if you fail to budget your expenses, you are destined to overspend as you won’t know how much money you have spent, on what type of expenses you have spent your money, and which expenses you can control to save some money.
You should start budgeting to allocate spending limits to each type of expense, which will help you keep your expenses under control. Budgeting is the first step to effectively manage and grow your finances.
Buying a new car not only involves paying significant cash upfront but also involves regular maintenance costs. If you think that you will have to borrow money to purchase and maintain the car, you should defer your purchase and instead save money for buying and maintaining a car.
It can be tempting to buy a mortgage for a bigger house, but you should reevaluate whether you really need a bigger house and whether you can afford the extra mortgage payment. If you cannot afford the mortgage payment, you should settle for a normal sized house that fits your needs and has affordable payments.
Bad financial habits can ruin your financial situation and, if not corrected, can get you in a deep financial mess. If you regularly commit the financial spending mistakes that we mentioned above, you should immediately take steps to rectify them to improve your financial position. So, the next time you are about to spend your money, think twice and ensure that you are not indulging in bad financial spending behavior.