Whether you want to eat healthier, get more exercise, give up smoking or alcohol or coffee, a new year is a great time to break bad habits and learn better ones. So why not give the way you handle your money an overhaul too? According to Statistics Canada, Canadians managed to bring down their credit card debt by 18.3 per cent between February 2020 to February 2021, but with the economy continuing to struggle in provinces with ongoing COVID closures and restrictions, will you continue to resist the urge to fall back into your bad money habits? Do you even know what those habits are? Here are some of the bad money management habits you need to break in 2022.
Bad money habits: not making any effort to save
Since the start of the pandemic, each new wave of lockdowns and restrictions brought with it thousands of job losses. Of the Canadians who lost their jobs, the ones who had some savings in the bank were in a better position to weather the storm until they could find a new source of income. No, it isn’t easy to save money when you’re making barely enough to get through the month, but one of the worst money habits you can have is to not even try. Whenever you make more than you need to cover the bills and necessities, put some of it aside — even if it’s only a few dollars. You never know when you’ll need it and it’ll add up over time.
Bad money habits: not setting financial goals
It’s easy to say you need to save for a rainy day, but let’s be honest: it’s just as easy to say, “I’ll save for that rainy day tomorrow. Today I have one of the best credit cards in Canada and I’ll be damned if I don’t swipe it.” Setting financial goals to work towards will help you stay motivated and resist the temptation to overspend. In fact, Savvy New Canadians suggest you start your journey to financial success by setting short-term, medium-term and long-term financial goals.
Bad money habits: not having a budget (or not sticking to the one you have)
To reach your financial goals, you need to set a budget and, more importantly, you need to stick to it. Knowing how much money you have, how much needs to go for the essentials and how much you have for the fun stuff will help you see where you can cut down. It also makes it more difficult to overspend when you’re clear about the fact that what you want to buy is not in your budget.
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Bad money habits: not keeping track of your spending
To draw up a budget, you can assign arbitrary amounts for each category, but that’s not going to help you much if it’s not realistic. You’ll be able to come up with a much more realistic budget — and one that you can stick to more easily — if you know exactly how much money you normally spend on groceries, clothes, cosmetics and the like. Manulife Bank suggests you download one of the many great finance apps to track your spending and get started on the road to better money habits.
Bad money habits: being late on your bill payments
When it comes to bad money management, few habits are as bad as paying your bills after the due date. Whether it’s the rent or the hydro bill or your credit card bill, paying late can lead to penalties that are carried over, so that next month you’ll have to pay even more. Credit Canada suggests that if you don’t want to set up automatic payments, you at least set a reminder on your phone about a week before payment is due. It’s also useful to remember that if you do miss a payment on your credit card bill, one of the phone calls that can save you money is to the credit card company to ask if they can waive the late fee.
Bad money habits: paying only the minimum amount on your credit card bill
Of course, there will be months when you can only pay the minimum amount on your credit card bill (and we totally understand!), but getting into the habit of paying the balance in full whenever you can is one of the best money management habits you can learn. As Credit Canada points out, not paying the full balance amount means paying more interest: you can end up paying 50 per cent more for everything you’ve bought with the card.
See also: All your personal finance FAQs answered.
Bad money habits: not prioritizing bills
If bad money habits have put you into debt that you’re struggling to pay off, one of the mistakes that can dig you deeper in the financial hole is to randomly pay some bills while letting others wait for later. There may be times when you can’t pay all the bills at once: when this happens, pay the ones with the highest interest rates first. Even if you’re in a better financial position, Savvy New Canadians suggest that you pay off high-interest debts before you try to save or invest your money.
Related: What to do if you hate your job.
Bad money habits: shopping online too much
Lockdowns may have forced you to get into the habit of shopping online, but if you tend to have poor financial control, it’s time to close your laptop, switch off your tablet and delete those store apps on your phone. If you need to do some shopping, put on your mask and go to the brick-and-mortar store (barring any provincial restrictions, of course): this way, you have time to think about whether you really need that item in your shopping basket.
See also: How to curb your online shopping addiction.
Bad money habits: spending money on the wrong things
Sure, we all sometimes buy something on impulse and then never use it. But if you make a habit of buying things that you don’t use, you’ll have less money to save for that item you really want. So, take stock of everything you let go to waste: maybe you buy produce at the farmer’s market every week and never get around to making that soup or maybe you have a closet full of coats you never wear, or maybe you still pay that gym membership you got before lockdown got you into the habit of working out at home. Once you know how much money you waste, it will be easier to become more mindful of your spending habits.
Bad money habits: you’re still smoking (yes, really)
Hear us out: one of the reasons Canadians managed to lower credit card debts since the start of the pandemic was that the move to working from home meant we didn’t spend so much money on transport or gas, take-out lunches and coffees to-go: those things that experts always tell us we need to stop spending money on. However, in 2020, nearly 15 per cent of Canadians between 18 and 34 smoked regularly. If you’re one of them, well, you know the health risks. But have you done the math on how much money you’re burning? Consider this: in November 2021, a carton of 200 cigarettes cost more than $140 on average, according to Statistics Canada. That was $11 more than the same time a year before. Even if you cut down to six or seven cigarettes per day, that’s still a carton a month or $140.
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