Now is the best time to establish good spending and savings habits. If you are not careful with your money, you risk having the same problems, or worse, down the line. You need to keep a budget in order to know where you stand financially, so that should be your first step. In addition, there are bad financial behaviors that will set you up for failure. You also will have trouble in the future if you spend more than you make or fail to save for necessary expenses. It’s easy to convince yourself that you have time to learn to be responsible, or that if you wanted, you could stay in budget. However, it’s often true that the longer you keep up a behavior, the more likely you are to keep it up. There are some behaviors that could truly endanger your financial future, and make it difficult for you to manage your money down the line.
1. Not keeping or maintaining a budget
If you don’t keep a budget, then it can be difficult to manage your money. When you don’t know how much you are spending, or how much you can afford to spend, there’s little incentive to spend wisely. If you have a lot of extra money, or few bills, it might not seem necessary to keep a budget. However, without a budget, it can be easy to overspend, and to forget to save enough. If you don’t get into the regular habit of budgeting regularly, you risk sending yourself into a downward spiral of spending too much, which could cause a large problem later.
If you don’t learn how to budget now, you certainly won’t properly manage your money in the future, unless something drastically changes. According to CNN Money, in order to create a budget, you should determine how you are spending now, make goals, and track your spending.
2. Buying everything new
It’s wonderful to buy things new, because you know that no one else has used them. You also might find satisfaction in having the money to buy something new, and the hope that because it is new, it will last. However, if you buy everything (or even most things) new, you will be setting yourself up for a fall down the line. New items usually cost more, and in addition, they are not always necessary. There is no good reason to spend the money to purchase everything new, and doing so could eventually trick you into thinking that you that you need to purchase items new. Then if you can’t afford the items, you will have a hard time managing your money because you will still want to purchase new items. There are many items you can and should buy used. According to U.S. News & World Report, this includes cars, baby and toddler clothing, fitness equipment, and tools.
3. Spending more than you make
This behavior pretty much speaks for itself. If you consistently spend more than you make, you are setting yourself up for financial failure. You won’t be able to manage your money later, let alone now, if you keep spending more than you make. Not only will participating in this behavior make it hard for you to pay for your bills or save for the future, but you also might end up in debt.
There are many positive effects of spending less. According to The Simple Dollar, when you spend less you have more available to pay down debt, your stress level falls, and you might even be able to take a new job because you will have more financial freedom. Not to mention, you won’t be living paycheck to paycheck, or worse.
4. Not setting money aside for retirement
Setting money aside for retirement should be on of your biggest goals, and you should absolutely be keeping track of how much you are setting aside. If you are failing to put any money away for retirement, or you are not saving enough, you may have to work a lot longer than you expect to in the future. It will be difficult to manage your money later in life if you don’t save enough for retirement now. Just how much you need is hard to say, but using a retirement calculator can help, like this one from the AARP. Don’t make the mistake of waiting till later to save, or neglecting your retirement savings completely.
5. Not saving for emergencies
Almost all of the behaviors listed above affect your ability to save money. If you can’t keep a budget, if you purchase everything new, or you consistently spend more than you make, you will have little left for your savings. While retirement savings should be an essential part of your budget, you also need to save for emergencies and other items. If you want to make a bid purchase, you should be saving for it. You should also be building an emergency fund so that you are prepared when an emergency strikes. Without proper savings, and especially without an emergency fund, you risk using credit cards or having to borrow money when you need to pay for something down the line. This can set you up to be in debt later, which will make it difficult for you to manage your money. Also, if you fail to save now, you probably won’t have the savings you need later.
While you can develop better financial behaviors over time, the best time to try to do so is now. If you wait too long to live within your means, or save for the future, you risk continuing to poorly manage your money down the line.