8 Bad Money Habits That Are Hurting You Financially

Constantly broke? Here are some ways you might be sabotaging your own financial situation.

By Melissa Wong        6 July 2023

Even if you earn a decent income and don’t have too many financial responsibilities, you might sometimes find yourself broke at the end of the month. Part of the reason for this may be due to unhealthy money habits. 

According to Karen Tang, Certified Financial Planner and Senior Wealth Management Consultant, our money habits play a significant role in shaping our financial health, both in the short and long term. Disciplined money habits involve budgeting, saving, investing, debt management, having proper protection in place, financial education and goal setting.

“Consistency in your money habits is the key here,” she points out. 

“Along the way, you should also review your financial plans to ensure that you’re on track. If need be, you can make necessary adjustments to these plans.”

Poor money habits don’t just leave you broke; they can also cause emotional stress, get you into debt, and reduce the opportunities you have to accumulate wealth.  

“It’s important to develop good money habits early on in life and stick to them as you get older,” adds Muhammad Firdaus Syazwani, founder of Dollar Bureau. 

“Doing so can improve your financial health and help you achieve greater financial stability and security in the long run.”

Avoid these eight bad money habits to protect and grow your wealth, say our experts. 

1. You don’t save for your financial goals

Once you have a clear picture of your income and expenses, set financial goals for yourself to achieve in the short, medium, and long term, Firdaus advises. 

This could include paying off debt, saving for a down-payment on a property, or building an emergency fund.

Having specific goals in mind across multiple timeframes will help you stay motivated to stick to your budget in the long term.

Saving money regularly is essential for building a strong financial future. It can also allow you reach your financial goals sooner, keep you out of debt and help you pay for emergencies if or when they arrive. 

“Start by setting a savings goal and creating a plan to reach it,” Firdaus advises. 

“You might decide to save a certain percentage of your income each month or set a specific dollar amount to save each week. You can also automate your savings by setting up a direct deposit into a savings account.

“Remember, the key to successful saving is consistency. Even if you can only save a small amount each month, it will add up over time and help you reach your financial goals.”

2. You don’t have a budget

“When you create a budget, you gain clarity about where your money is going; plus, a budget allows you to make informed financial decisions,” says Karen. 

“A budget serves as a framework to help you track your cash inflow (income), your cash outflow (expenses) and your savings. Done properly, this process helps you to live within your means.”

Firdaus says that you should be willing to adjust your budget as needed, too. Life happens, and unexpected expenses may arise.

If you find yourself consistently overspending more on certain things, such as groceries or entertainment, for example, consider adjusting your budget to reflect your spending habits better. Perhaps you can cut down your budget for meals to spend more on entertainment. 

Keeping your budget allocations flexible helps you stay motivated so that you won’t have to stop doing the things you enjoy.

3. You live beyond your means

This can potentially lead to a cyclical problem of incurring debt, especially credit card debt, Karen points out. The new purchases may bring instant gratification but the financial consequences are often ignored. It’s therefore important to be able to differentiate between needs and wants and to prioritise saving and investing for the future.

“It’s understandable that once you start earning a full-time income, you’d want to splurge on yourself,” Firdaus adds. 

“That’s not a bad thing; you should definitely treat yourself for working hard. But this becomes a concern when you start spending too much consciously and, more often than not, subconsciously, especially if you’re trying to look good in front of your peers.”

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4. You make impulsive purchases

Before making a purchase, Karen says to pause and consider if it aligns with your goals and priorities. Small amounts here and there can add up to a sizeable sum at the end of the day. Do you rush into buying big-ticket items costing three or four figures and beyond? 

“Personally, I would sleep on it for a few days, or even a few weeks if a huge amount was involved.” 

Here are more tips on how to maximise your savings when you shop.

5. You didn’t invest early enough

Young people often fail to begin an investment programme because they lack basic knowledge of where or how to start,” Karen points out. 

“Delaying investing can have a significant impact on long-term wealth accumulation because compound interest works best when it’s given time to grow.”

Aside from investment, find out how else you can achieve financial fitness to accomplish your goals.

6. You use credit cards improperly

Credit cards can be used for both emergencies and big-ticket items, as well as everyday expenses and bills, but Firdaus says to use them responsibly and not fall into the trap of overspending and accumulating debt.

“Using credit cards for everyday expenses and bills can be convenient and even earn you more rewards or cash back, but only if you have a plan to pay off the balance in full each month.

“Otherwise, you may end up paying high interest rates and fees, leading to a cycle of debt and financial stress. Again, it’s about spending and using your credit card responsibly. 

“You can start by using it for only big-ticket items and emergencies that you’re confident you can pay off before slowly using it for everyday expenses, or vice versa.

“The trick is to budget and track your spending so that you use your credit cards responsibly, as a tool to manage your finances. Go at your own pace; it’s better to lose out on some rewards than to be stuck in credit card debt.”

7. You don’t distinguish between wants and needs

Firdaus follows these three guidelines to distinguish if something is a want or a need for him. 

  • Assess the urgency: “I ask myself, ‘Do I need this right now to survive or stay safe?’ Needs are essential for basic well-being, while wants can usually be put off without immediate consequences.”
  • Consider consequences: “I think about what could happen if I fulfil or ignore a particular want or need. Needs tend to have more serious consequences if ignored, while wants usually have milder outcomes.”
  • Consider alternatives: “Are there cheaper alternatives to an item I’m intending to buy? This could be something lower-priced or something that I could pay in instalments. If there are cheaper alternatives, chances are I’m looking at a want.”

8. You haven’t sought professional financial advice or brushed up on your own financial knowledge

Many people have the misconception that they’re only ready for financial planning when they’re making a certain amount or have saved a specific amount of money. But Karen says that waiting this long may cause you to lose out on the help of a qualified financial advisor, who can provide valuable insights and help you make better financial decisions. 

“In addition, working with a financial advisor gives you the opportunity to hone your basic financial literacy knowledge and skills. You should also invest time into educating yourself about personal finance through books, online resources or courses.”     

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