THE BROKEN WALLET

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Are you guilty of sabotaging yourself with the below bad money habits? This might be a possibility – and I place emphasis on “might” because everything isn’t black or white. But although circumstances differ, if you’re not careful some decisions could stunt your financial growth.

You probably already know the danger of too much debt, no budget, and having nothing in your savings account. So today we’re looking at scenarios that you might not think about.

Here are four self-sabotaging bad money habits.

Bad Money Habits #1. Being a financial enabler

One bad money habit you might be guilty of is financially enabling someone – maybe a sibling, child, or friend.

If you’re financially stable – meaning you’re in a good place financially – you might have zero problems helping a friend or relative when they hit a rough patch. Maybe somebody helped you in the past, and this is your way to give back. There’s nothing wrong with this. And you might feel guilty about “not helping.”

However, I do caution repeatedly going into your pocket to help the same people over and over again. There’s a difference between helping someone and enabling someone.

Enabling prevents someone from taking responsibility for their own actions or situations.

You basically become their fallback guy. And whenever they’re in a tough spot (even when they bring it on themselves) they ask you to bail them out.

This is dangerous for two reasons. One, the person doesn’t learn how to solve their own problems. And two, you could hurt your own finances in the process.

You might lend money that you can’t afford to lend. Or you might make decisions with long-term consequences like cosigning a loan for someone who has a history of managing their credit poorly.

If you don’t know how to say “no,” some people will use you until they can’t anymore. And unfortunately, you have to deal with the financial repercussions. 

Bad Money Habits #2. Relying on a partner’s credit

Now, every couple has to decide how they will manage their finances, and I can’t tell you what to do. Even so, another common bad money habit is relying too much on a partner’s credit history.

As an adult it’s important to establish your own credit identity – one that’s separate from your partner.

The reality is, you never know when you’ll need your own credit.

Relationships end. And couples who are happy today might not be happy in five years. In which case, they have to rent homes and buy cars on their own – with their own income and credit.  

Income is a big factor when renting or financing something, but it’s not the only factor. Lenders and landlords also pay attention to credit because this says a lot about your history of paying bills.

If a relationship ends, it’s easier to make the transition from couple to single person when you have an established (good) credit history.

And if you need to establish credit, one option is getting a secured credit card. Of course, it isn’t enough to get a credit account – you have to manage it well. This involves paying your bills on time and keeping your balances low.

You need to be patient, too. You don’t build a 700 or 800 credit score overnight.

Bad Money Habits #3. Lack of self-awareness

This is another bad money habit because without this, we can cause a lot of our own pain. 

And yes, I know this isn’t always the case. Situations beyond our control happen. But let’s keep it real, sometimes we have no one to blame but ourselves. So it’s important that we recognize certain patterns.

From observation, there’s often a common denominator when someone constantly struggles financially. They might do certain things over and over again, which keeps them in a rut.

Therefore, if you’re going in circles and not getting ahead, it’s time to get to the root. And be honest with yourself, especially if your financial choices thus far have caused more headaches than happiness.

For example, do you have a problem with impulse control? Do you have trouble tracking you spending? Is the problem fear of missing out? Are you living above your means?

You have to identify a problem before you can solve it. 

Bad Money Habits #4. Too much house 

I had to include this because I recently read that millions of Americans spend between 37% and 50% of their income on housing.

This might not seem like a lot, but it’s a high percentage because you shouldn’t (ideally) spend any more than 30% of your gross income on housing. 

Now, I realize some areas are more expensive than others. So keeping housing under 30% is harder, especially if you’re single.

The problem is that some people don’t even think to keep their payments within this percentage. As a result, they spend upwards of 50% of their income—even when there are cheaper, safe alternatives.

You can’t ignore the benefits of spending less on housing. 

This is likely your biggest monthly expense. And if your biggest expense takes up 50% of your income, it can become difficult to hit other financial goals.

It might be harder to save an emergency fund, a sinking funds account, a retirement fund, or pay off other debts.

Do a self-evaluation and be honest with yourself. Is your housing complicating your finances? If so, you might have to make some tough decisions. But in the end, these are decisions you won’t regret. 

Did you find this information helpful, or got a question about self-sabotaging money and finances? Let us know ↓↓