Insights + Resources

Bad Spending Habits That Can Be Corrected

Jun 12, 2019

Americans have a great deal of disposable income relative to many other nations, yet our free spending can take us further and further away from the potential for financial freedom. Some people fall into crippling spending habits and injure their finances as a consequence.

Failing to Save

Saving even $50 or $100 a month – isn’t that hard under most financial conditions. Even so, some households don’t put much of a priority on building a cash reserve of some kind, a portion of which could be used for equity investment.

When you don’t make saving a goal, you don’t have any money to withdraw in a pinch – so if you need to get ahold of some money, where do you find it? Basically, you have three options. One, turn to friends or Mom or Dad. Two, divert money that would go toward a core need (food, rent, the heating bill) toward the sudden crisis. Three, charge your credit card. (There are other options, but they are best not explored.)

Good habit: save just a little, then a lot.You can start a savings campaign by saving “invisibly” – that is, just spending $10 or $15 or $20 less on a regular expense each month. Maybe two or three, even. That’s less than a dollar a day per expense. When your earnings climb further above your financial baseline, you can increase the amount you save/invest.

Buying Things on a Whim

The correlation between impulsive spending and credit card use isn’t too hard to spot. Spending money you don’t have on material items that will soon depreciate doesn’t put you ahead financially.

Good habit: set a budget when you shop.As you arrive at the market, the mall or the local power center, arrive with a limit on what you will spend on that shopping trip and stick to it. Take an hour (or a day) to mull over any big buying decisions – are you buying something you really need? Lastly, use cash whenever you can.

Living on Margin

Living above your means, charging this and that credit card – this is a path toward runaway debt. You may look rich, but you’ll carry a big financial burden that risks being “out of sight, out of mind” in between credit card statements.

Good habit: strive for lasting affluence, not temporary bling.Possessions symbolize wealth to too many Americans. Real wealth is measured in accumulated assets. They aren’t usually visible, but you can count on them in the future, in contrast to ever-depreciating luxury goods.

Buying Unnecessary Services

Cable subscriptions, extended warranties, service contracts for highly reliable items, health club memberships that translate into little more than an alternate place to shower – they all add up, they all siphon some of our dollars away each month. In many cases, we pay for options rather than necessities.

Good habit: evaluate who benefits most from those services.Are they benefiting the provider more than the consumer? Are they entrees to a “main course” – a steady, long-range financial exploitation?

Go against the norm – it might leave you a little wealthier. In April, Gallup found that 62% of Americans liked saving money more than spending it. Just 34% liked spending more than saving. This appreciation of frugality is relatively new. As recently as 2006, 50% of Americans told Gallup that they enjoyed saving more than spending with 45% preferring spending.1

If we love saving money, a key statistic doesn’t reflect it. According to the Commerce Department, the typical U.S. household was saving 4.8% of its disposable personal income in May. The personal savings rate for 2013 was 4.5%, the least in any year since 2007. Compare that to 6.7% across the 1990s, 9.3% across the 1980s and 11.8% during the 1970s.1,2

Perhaps many of us want to save but can’t due to financial pressures. Perhaps the economic rebound is encouraging personal consumption over saving. Whatever the reason, Americans on the whole don’t seem to be saving very much. That’s the status quo; going against it might help you build wealth a little more easily.

Tags: ,

More Insights

Aug 16, 2019

Some of us share a common experience. You’re driving along when a police cruiser pulls up behind you with its lights flashing. You pull over, the officer gets out, and your heart drops. “Are you aware the registration on your car has expired?” You’d been meaning to take care of it for some time. For … Continue reading “The Cost of Procrastination”

Aug 14, 2019

Actor Lee Marvin once said, “As soon as people see my face on a movie screen, they [know] two things: first, I’m not going to get the girl, and second, I’ll get a cheap funeral before the picture is over.” Most people don’t spend too much time thinking about their own funeral, and yet, many … Continue reading “Put it in a Letter”

Aug 12, 2019

In a recent study, 35% of married couples described money issues as their primary source of stress. While there are many potential causes of such financial stress, in some cases the root may begin with habits formed early in the marriage. Fortunately, couples may be able to head off many of the problems money can … Continue reading “Money Tips for Newlyweds”

Aug 7, 2019

The journey to and through retirement occurs gradually, like successive chapters in a book. Each chapter has its own things to consider.

Aug 5, 2019

If you own an Individual Retirement Account (IRA), perhaps you have heard about Roth IRA conversions. Converting your traditional IRA to a Roth IRA can make a lot of sense depending on your situation. But remember, consulting with your financial advisor before making financial decisions is never a bad idea. Ready to learn more? Read … Continue reading “Roth IRA Conversions”

Insights + Resources >
We are preparing the questionnaire, please let us know through the contact page if you want to be notified when it's available.
Thank you.

Epic IMPACT Quarterly Newsletter

To Receive Our Quarterly Impact Newsletter:

 
Your privacy is important to us. We will not rent or sell your information.

Epic Market Commentaries

To Receive Our Market and Economic Commentaries

Your privacy is important to us. We will not rent or sell your information.

7 Steps for Investing with Impact

 
Your privacy is important to us. We will not rent or sell your information.