• April 20, 2024
  • Last Update April 20, 2024 7:31 PM
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A look at unhealthy Financial habits that are taking your money down the drain

A look at unhealthy Financial habits that are taking your money down the drain

Wednesday,April , 2024

McCreadie Andias

As the high cost of living continues to take a toll on the already grappled economy. Millions of Kenyans and their families take a second look at their spending habits, it’s more important now than ever to recognize where you can cut back and save.Implementing healthy financial practices can help individuals and families cut expenses and save more money, leading to improved financial stability and well-being.

An easy place to start is looking at your spending habits and recognizing when you spend when you don’t need to.

This money could be added to your emergency fund or saved for holiday shopping, which often seems to come as a surprise each year.

One of the most common ways people get into financial trouble is through unnecessary spending that drags their budget down. With people combing through their finances this year, it’s a good opportunity to zero in on what your money goes toward and break the habit of spending on things you don’t need.

Here are some poor financial practices .

1. Paying for insurance you don’t need

This is one that often goes overlooked because many often think the more insurance, the better,But certain forms of insurance are just not necessary for most people and can lead you to spend unnecessarily.

These insurance products might be a waste of money.You might not need Collision insurance if your car is older and not worth much. Depending on your deductible and damage, it might not make sense to have collision coverage on your insurance policy.

2. Making minimum credit card payments when you can afford more

If you can afford to make larger payments toward your credit card bills — or even pay your balances off in full — you should.

By making only the minimum payments and carrying a balance month to month, you end up paying a high rate of interest, and your credit card balances quickly balloon.

High-interest debt quickly compounds and can get out of control. If you have other debt in addition to credit card debt, prioritize the one with the highest interest rates. If the interest rate is in the double digits, it might be a good idea to pay more than the minimum to eliminate overall debt more quickly.

For those who can’t afford to pay more than the minimum, make sure you’re at least paying what you can on time when the bill is due.

3. Giving too much power to emotional spending

Emotional spending happens on occasion, especially during times when we are seeking comfort. But making a habit of it — whether it’s positive or negative emotions or both — can be disastrous to your financial situation.

Of course, there are going to be times when you want to treat yourself and buy something new — that’s human nature. But emotions change all the time, and you shouldn’t hand over the wheel or let them pull you in too many directions. That’s a surefire way to drain your resources.If emotional spending puts you into debt or throws your budget off, that’s not okay. Instead of yielding to every emotional impulse, try to spend on small things or something specific that you’ve budgeted for ahead of time so you don’t dig yourself in a hole.

Always check the return policy, especially if you love to shop final sales.And if you’re celebrating a win, such as a promotion or a big achievement, try to imagine how you’ll feel in a few days before splurging on a fancy dinner. If it still feels OK and there’s room in the budget, go for it. If something feels off, listen.

To help reduce the temptation to spend, remove shopping apps from your phone and unsubscribe from retailer emails.

Before you make a purchase, try writing it down first, along with the price. Wait 48 hours before you buy it, or any item in your shopping cart, so you can make sure it’s within your budget and really makes sense for your lifestyle.

If you forget about it two days later, chances are you don’t actually need the item, but simply needed a way to soothe yourself that day.

4. Paying for convenience

Planning ahead can help you save money on all kinds of things. For example, you’ll pay a lot more for snacks you buy at the gas station than you will if you just bring treats from home.Here are some ways you can better plan ahead so you don’t end up paying for the “convenience factor” while traveling, whether over the holiday season or in general:Look up gas prices online to find the cheapest prices. Gas stations very close to highway entrances and exits often charge much more than gas stations further away.

Just make sure you don’t drive too far out of your way to get the cheaper prices and waste fuel in the process.Book any service or travel plans directly through the provider, rather than through a third party.Third parties may allow you to compare rates easily but may charge other fees during the booking process.

5. Living beyond your means

Living beyond your means as a way to gain status, is an incredibly common way people waste money. It’s easy to feel pressured to buy certain things because others around you have them.This “lifestyle creep” and comparing oneself to another happens often a big reason people get into debt or go broke.

While it’s hard to avoid comparing your life to others in a world abundant with social media, try to be true to yourself, your lifestyle and your budget. No two financial goals are the same because the road to reach that goal is likely very different.

Everyone comes from different paths, but what it takes your neighbor to reach a certain financial milestone is likely different from what it takes you, and vice versa. Keeping your sights set on your own personal goals, needs and priorities is a much better way to save money — and maybe even lead a happier life.

Here as some tips for healthy financial management

1.Budgeting and Expense Tracking

Creating a budget and tracking expenses can provide insights into spending habits and identify areas where costs can be reduced.

By allocating funds to essential needs and prioritizing discretionary spending, individuals can better manage their finances and save more money.

For instance, Using budgeting apps or software like Mint or YNAB to track daily expenses, categorize spending, and set budget limits for different categories such as groceries, entertainment, and transportation.

2.Meal Planning and Cooking at Home

Planning meals in advance, grocery shopping strategically, and preparing meals at home can significantly reduce food expenses compared to dining out or ordering takeout regularly.

Batch cooking and meal prepping on weekends to prepare meals for the week ahead, minimizing food waste, and saving money on impulse purchases and convenience foods.

3.Negotiating Bills and Expenses

Negotiating with service providers, creditors, and vendors can help lower bills, interest rates, and subscription fees, resulting in substantial savings over time for instance, Calling utility companies to inquire about discounts, promotions, or lower-rate plans, negotiating credit card interest rates or annual fees, or canceling unused subscriptions and memberships to save money.

4.Comparison Shopping

Researching prices, comparing products, and seeking out discounts or deals before making purchases can help stretch the budget and save money on everyday expenses.

Using price comparison websites or apps to compare prices on groceries, household items, electronics, and other goods, and opting for generic or store-brand products instead of name brands can help to save money without sacrificing quality.

5.Healthcare Cost Management

Taking proactive measures to manage healthcare costs, such as utilizing preventive services, shopping around for prescription medications, and exploring lower-cost healthcare options, can help reduce medical expenses and save money on healthcare bills.Here, Choosing generic medications over brand-name drugs when possible, using mail-order pharmacies or prescription discount programs to save on medication costs, and exploring telemedicine or community health clinics for routine medical care to lower out-of-pocket expenses is much cheaper.

6.Building an Emergency Fund

Establishing an emergency fund to cover unexpected expenses, such as car repairs, medical emergencies, or job loss, can prevent individuals from relying on high-interest credit cards or loans and help avoid financial stress during challenging times.

Setting aside a portion of each paycheck into a separate savings account designated for emergencies, aiming to accumulate three to six months’ worth of living expenses will provide a financial safety net in case of unforeseen circumstances.

7.Investing in Preventive Health Measures

Investing in preventive health measures, such as regular exercise, healthy eating habits, adequate sleep, and stress management techniques, can help prevent costly medical conditions and reduce healthcare expenses in the long run. Incorporating physical activity into daily routines, eating a balanced diet rich in fruits, vegetables, and whole grains, practicing mindfulness or meditation to reduce stress levels, and prioritizing sleep hygiene will help improve overall health and well-being.

By adopting these healthy financial practices and making conscious decisions about spending and saving, individuals can cut expenses, build savings, and achieve greater financial security and peace of mind over time.

By McCreadie Andias

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