8 Habits That Throw Your Money Away
Once upon a time a man went to Las Vegas with $5 in his pocket. Over the course of the weekend and some extraordinary luck, the man turned $5 into $300 million.
Then he bet the lot and lost it all on the turn of a card.
When he returned home, his wife asked how much he’d lost and the man replied $5. This is the gambler’s mentality: self-denial to the point of mental illness. I never had a gambling problem, but I’ve endured serious problems with addiction. And I know exactly how that denial feels — and how hard, necessary and life-changing it is to face reality.
I first heard this story in one of Dan Ariely’s books called Small Change: Money Mishaps and How to Avoid Them. Ariely’s advice to gamblers: don’t do it.
A professor at Duke University and famed behavioral economist, Ariely has some interesting insights into how our minds work when it comes to money. Ariely also doesn’t hold back – he’s compared our financial decision-making ability to Enron’s crooked accounting practices.
He says, “We use funny mental accounting all the time, to trick ourselves into spending more. Companies like Enron had shady accounting practices, shifting money around between different departments, and we do the same thing. For instance if we decide something comes from our ‘entertainment fund,’ then we are usually okay with spending it.”
It’s no surprise then that the Federal Reserve’s latest numbers show the average American household carries $137,063 in debt.
To keep the money you earn and avoid spending it on things you don’t need, it’s critical you adopt good money habits and curb your bad ones – specifically, these eight in particular.
Habit 1: Buying Cheap Stuff
Ariely says a lot of our financial troubles stem from our inability to think long-term. Buying cheap clothes, food, cars, electronics, etc. all seem like a good idea in the short term – after all, you’re paying less up front.
But you end up paying more for cheap goods later in healthcare costs, repairs, or have to frequently replace items.
It’s almost always better to buy quality and timeless goods than to skimp.
Habit 2: Purchasing Items Because They’re On Sale
If you need it, buy it.
Otherwise, keep yourself from getting sucked into buying something because it was on sale. Supermarkets and clothing stores are masters at playing this game.
Their goal is to increase the cart value of every shopper that walks through the door. Deals like buy one get one 50% off look good on a sign but hurt your wallet.
Unless you absolutely need something or know you will use it – like toilet paper or toothpaste.
You should never justify your overspending by thinking: “well, at least it was on sale.”
Habit 3: Easy-to-Access Savings Accounts
Mobile banking has made it too easy to access your money, which sounds crazy, I know. But hear me out.
Too many people get into the habit of slowly building savings and then the smallest hurdle derails the whole operation.
A better strategy is to make accessing your savings accounts hard. Open savings that are not linked to your current account. This will help you think twice about transferring that money if it’s not so easy to do.
Habit 4: Instant Gratification
With one-click ordering and same-day delivery, we’ve become conditioned to get what we want exactly when we want it.
This is bad for your bank account because these purchases are typically impulse buys that if you just waited a few days, you’d likely reconsider 90% of the items in your shopping cart. If it’s small stuff, wait three days before ordering.
For bigger purchases, make it a rule to wait at least 30 days before you buy.
You’ll be surprised how many items you remove from your shopping cart when you wait.
Habit 5: Saving Too Much Too Fast
You might be surprised by this one. But let’s think about it: when you find yourself in a financial bind, your mind goes into savings mode.
Suddenly you realize that drip coffee will do instead of paying $4 at Starbucks. This new found clarity often leads to unrealistic savings goals.
Why would saving too much be a bad thing?
The issue with aggressive savings goals is they’re almost always unsustainable.
The slightest change in expenses one month can destroy the best laid plans and it’s always harder to restart good habit. Instead, start small and build your savings goals as your lifestyle adjusts accordingly.
Habit 6: Shopping Without a List
Under no circumstance should you go grocery shopping without a list.
The same goes for grocery shopping hungry, you will buy around 20% more food than if you went on a full stomach.
Making lists of what you need and sticking to your list will dramatically lower your bills. If you’re the type of person who likes to add to your list as you shop, allow yourself one or two items but no more – make it a rule.
Remember it’s the simple stuff that works.
Habit 7: Wasting Time Finding Cheap Deals
Your time is worth more than small savings because it can’t ever be replaced. So don’t waste your precious time seeking out cheap deals.
Sometimes making a quick decision on a small purchase is a better money move than overthinking and overanalyzing the purchase in search of the best deal.
Done is better than perfect if done costs you less than the time required to seek out a marginal deal.
Habit 8: Keeping Your House Cluttered
Why is decluttering a good money habit? There’s the obvious benefit of being able to sell some stuff that you no longer use or need for extra cash.
But the hidden benefit is you realize what you actually need and what you don’t.
This is profound because it forces you to view new purchases through this lens. When you make decluttering a monthly habit, you’ll start to see what truly matters to you and what is excess.
Cultivating this mindset is what will save you the most money in the long run.
Take heed of the above, and curb these bad money habits. It won’t be long before you notice your separate savings accounts start to grow.
Editor, Brian Rose Uncensored