5 WORST money habits

1. Eating out often

Eating out is one of life’s little luxuries which can be very tempting. Whether it is going out for lunch during the week, picking up takeout after work or eating at your favorite dinner spot on the weekend. If you actually calculate the amount of money spent on eating out you would really be surprised. I would guess that many of you are spending $100 or more in this area. Honestly, that could easily be spent on a single night out. The good news is, this is a GREAT place to save.

I am not suggesting never eating out again, just cut back. A good trick is to tally the amount you spend on meals out each week and then budget half that amount going forward. Get creative, maybe bag lunch 4 out of 5 days or go out for lunch on the weekend instead of dinner.

I would bet the average person could cut at least $50 out of their eating-out budget each week.

2. Using a card for spending

Switching from paying for everyday items with a credit card to cash can lower your spending. Psychologically, when you see your physical cash depleting it causes emotional anguish, not so with credit. There was a very interesting study done at Massachusetts Institute of Technology in 2000 which illustrates the psychological difference between spending cash and credit.

A good strategy for cash spending is the “envelope system”. Allot for the amount you want to spend each month on different categories like eating out, groceries and gas in individual envelopes. The amount and category of envelopes are personal and will vary person to person. When your envelope is empty, you have no more money to spend in that category. It will take a couple of months to figure out the right amount for each envelope. You may find yourself with empty envelopes before the month is through. Don’t worry, make small adjustments the following month and eventually your spending habits will adapt to the budgeted amount.

You may be thinking “but I get POINTS when I spend with my credit card!”. Well, the 1-5% of points you are earning may not justify the increased spending caused by using a credit card for purchases.

3. Paying a fortune for tv

If you are currently paying a television provider more than $100 per month for tv service, it may time to consider cutting the cord. Currently both Netflix and Hulu are $8/ month for a basic subscription. Combine that with a reasonable internet plan and you can be paying under $50/ month for tv and internet (ditch the land-line). I know people paying over $300/ month for tv, internet and phone.

This may seem like a big adjustment. I can tell you honestly, we have lived without cable for over four years and do not miss it. Like anything else, you will get used to it. If you’re not sure if you can handle the change, try only using Netflix and Hulu for a month. See if you can live without network tv before getting rid of it. Don’t have Netflix or Hulu? You can get a free month to start for each.

Just a heads up, if you follow the links above to sign-up I don’t get any compensation from either company… just good karma!

4.  Not shopping around for auto insurance

This is probably the most painless habit to break on the list. If you become complacent with your auto insurance provider, you could wind up paying for it. I recommend everyone shop around for auto insurance every 1-2 years. You may be surprised how much more you are paying with your current company.

First, print out a copy of your insurance policy (so you know exactly what coverage you have and what you are paying for it)  and then sit down and get 3-5 quotes. If you get a quote that is better than what you have now, its time to switch. You can potentially save hundreds of dollars for an hour’s worth of work.

If someone said they would hand you $200 for after an hour of work, would you do it?

5. Paying credit card interest

If you have a credit card which has a balance that will not be paid in full this month and you have good credit, stop what you are doing and sign up for a 0% interest balance transfer card. Paying credit card interest is one of the biggest wastes of money there is. The average credit card interest rate is around 15% with some as high as 25% or more. That means if you have a card with a $5,000 balance and you make a payment of $200 a month $63- $104 is going just to interest. That is money which could be put to good use.

There are many companies that will give you 0% interest for 12 or 18 months. Usually there is a transfer fee of 1%- 4%, but that is nothing compared to the amount of interest you could be paying on your current card.

If you have a balance and don’t have good credit, it may be difficult to get a 0% balance transfer offer. If this is your situation, I recommend following the other tips, tightening your belt, and getting the balance paid off as soon as possible.

 

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