5 Things to STOP Now to Get Your Finances in Shape

“Managing finances effectively is a vital aspect of achieving financial stability, but even the most knowledgeable and experienced professionals can fall into bad habits that negatively impact their finances. Whether it’s buying a new gadget or splurging on a luxurious vacation, impulsive purchases can quickly add up and deplete your savings.

In this article, we’ll explore five things you need to STOP doing immediately to get your finances in shape.

1. Spending Money Impulsively

Impulsive spending can be a major roadblock to achieving financial stability. To avoid falling into this trap, it’s important to create a realistic budget and stick to it. Plan your spending in advance and think twice before making any purchases that are not necessary. Something that has worked really well for me is understanding delayed gratification instead of instant gratification. When you really want something and you put money away each pay day to eventually buy it, the satisfaction lasts longer because you’re looking forward to it – the anticipation builds up.

Conversely, when you buy impulsively, the instant gratification can turn into remorse when you realise you needed that money for something you forgot about such as car registration or a new fridge when your old one breaks unexpectedly. Start small and train yourself to get better with delayed gratification – your future self will thank you for it!

2. Ignoring Your Budget

Not having a budget is like driving without a map – you don’t know where you’re going or how you’re going to get there. A budget will help you track your expenses and make sure you are spending within your means. There are so many great apps and ways to track your money these days (a lot provided by the banks themselves) that there really is no excuse. It’s a great way to take control of your finances and ensure you are on track to achieving your financial goals.

To keep it simple, start with a piece of paper and print out the last 3 months of transactions and highlight them into categories such as bills, groceries, going out, and spontaneous. Then you can work out how much you want to spend moving forward. Remember the budget can be updated until you find the sweet spot where you stick to a budget that lets you do what you want to do AND still save for future investments and other large expenses in the future. A great app to track your upcoming bills is called TimelyBills so you always leave enough money in your bank account to cover the bills due between pay days.

3. Using Credit Cards Recklessly

Credit cards can be a convenient and effective way to manage your finances, but they can also be dangerous if misused. If you are not careful, credit card debt can quickly spiral out of control (believe me, I’ve been there!) and put you in a difficult financial situation. To avoid falling into this trap, it’s important to pay off your credit card balance in full each month and avoid using credit cards for unnecessary purchases.

If you want to buy a property, having high credit card limits can also negatively affect your borrowing capacity. I recommend only having 1 credit card with a low limit no more than $6k if you are disciplined enough to clear the balance in full every month. If you have to pay interest on the credit card, then you are better off using a debit card until you are managing your money well enough to never pay interest.

4. Not Saving for Emergencies

Life is unpredictable, and unexpected expenses can pop up at any time. Whether it’s a medical emergency, car repair, or home maintenance issue, having an emergency fund can provide peace of mind and prevent you from falling into debt. Ideally, you should aim to save at least three to six months’ worth of living expenses in an easily accessible account such as a high-interest savings account or a cash management account.

Start by setting up an automatic transfer from your salary account to your emergency fund account on payday, even if it’s just a small amount to begin with. Saving for emergencies is an investment in your financial security, and it will pay off in the long run.

5. Not Investing in Your Future

Saving for the future is important, but it’s not enough on its own. Investing your money is the key to building wealth and achieving your long-term financial goals. Whether it’s investing in property, stocks, or a retirement fund, there are plenty of ways to grow your money over time.

It’s important to do your research and seek professional advice to ensure you are making informed investment decisions that align with your goals and risk tolerance. If you’re new to investing, start by educating yourself about different investment options and seeking advice from a financial advisor or planner.

In conclusion, managing your finances effectively requires discipline, patience, and commitment. By avoiding these five common mistakes and implementing good financial habits, you can take control of your finances and achieve your financial goals. Remember that it’s never too late to start, and small steps can lead to big changes over time. So, start now and take the first step towards a financially secure future.