As a personal finance writer, I like to think that I’m on the right path when it comes to my finances — I’m aggressively paying off my student loans, tracking all my expenses, and saving a bit for emergencies and retirement.
However, I wasn’t always this way. There were times when I paid the minimum towards my debt because I didn’t think it was important. In college, I hardly saved any money although I lived at home rent free. I’ve made my fair share of mistakes and I’ve learned from them.
As we make mistakes, grow older, and mature, we can often look back and see our mistakes so clearly in the rearview mirror.
But there is something even more insidious and powerful than making financial mistakes — full fledged sabotage. Of course, you probably don’t know you are doing it, nor do you want to do it, but there are ways that we all sabotage our finances.
Here are 5 telltale signs you are sabotaging your finances:
#1. You Don’t Know Where Your Money Goes
Have you ever been in a situation and thought, “Wait, where’d all my money go?
I know I made some money this month!” I know I have. It’s frustrating because you know you worked hard — so where did it go?
It feels like some magical troll must have raided your bank account in the middle of the night. But really this is a common case of not tracking your expenses or not employing a budget. It can be easy to get caught up in the rat race of everyday life.
Tracking expenses can be incredibly tedious and boring, however it’s necessary if you really want a clear picture of where your money is going. If you don’t know, you’ll be left scratching your head, and continuing to waste money on budget leaks.
To remedy this, create a free Mint.com account that tracks all your expenses. Use an excel sheet or a piece of paper. Regardless of how hi-tech or low-tech you want to be, it’s important to start tracking where your money goes.
#2. You Think of Extra Money as “Free Money”
I have so been guilty of this. On birthdays or Christmas, I sometimes get extra money and act like it’s “free money” and then decide to unnecessarily go out to eat, or have some fun with it. Windfalls, or unexpected money should be used to fund your short and long-term goals.
I have been better lately with throwing any extra windfalls to my debt, but it’s easy to think that because your money is unexpected, that you can spend it wherever you want. It won’t “touch” your budget. I’m not saying you need to take all the fun out of extra money, but maybe cap your fun at 5-10% of your unexpected income.
#3. You Buy Things Just Because They’re On Sale
I know several people that think that a sale gives them immunity from regretful purchases. You hear it in their voice, “But it’s on SALE!”
Just because something is on sale, doesn’t mean you need it. If you already have a TV or computer, you don’t need to buy another one just because it’s on sale.
If you didn’t need whatever product or service before it was on sale, you probably don’t need it now because it is on sale. These sales tactics can quickly wreak havoc on your budget and lead to mindless spending.
To be financially successful, you want to spend on your values, not on promotions.
#4. You Don’t Invest Because It’s Scary
If you find yourself hoarding cash under the mattress and petrified of the rocky waters of the stock market, you are actively losing money to the cost of inflation. While it’s important to have liquid cash readily available in an interest accruing savings account for emergencies, it’s equally as important to invest to build wealth.
If you are scared you don’t have enough money, or you don’t know how to get started, you can use Betterment and invest with $100/mo. If you can’t do that, you can deposit less for a cool $3/mo.
More than ever there are tools and resources to help you get started with investing. Start by educating yourself on sites like Investopedia and learning the basics. Don’t let fear jeopardize your financial future.
Yes, there are risks involved with investing, but everything worthwhile in life poses some risk.
#5. You Use Credit Cards as a Crutch
Using credit cards properly can be a great way to improve your credit score and reap the rewards (literally). However, it’s a slippery slope. If you find yourself haphazardly swiping, and consistently shocked when you see your balance, you may be using your credit cards as a crutch. A credit card is not an emergency fund, nor is it a license to spend recklessly.
To prevent using your credit card as a crutch, consider going on an all cash diet, paying your balance weekly, and only using your credit card for “needs” like groceries.
It’s easy to swipe and say “I’ll just pay it later” and then end up with a higher balance than expected at the end of the month. If you can’t pay your cards in full, you are sabotaging your finances by paying interest and getting on the never-ending treadmill of swiping and attempting to pay off your card.
In order to stop sabotaging your finances, it’s important that you keep track of due dates, track your expenses, monitor your budget, and work on creating a positive money mindset. Self-sabotage, especially when it comes to your finances, can easily creep up on you.
Are you guilty of any of these? How do you empower yourself to fix your finances?