For most people, success doesn’t come without first developing good financial habits. But sometimes what’s more important is acknowledging bad financial habits that need to be dropped. When you recognize counterproductive behaviors and eliminate them, you can achieve much more with your money.
Here’s more about 10 horrible habits that can keep you from growing rich and sabotage your financial future.
1. Living without an emergency fund
Life is full of financial surprises and costly emergencies. The antidote is having cash in an FDIC-insured savings account, known as an emergency fund.
Even a tiny emergency fund is better than nothing.
Having a cash cushion to fall back on helps you reduce stress, navigate financial hardships, and avoid going into debt. Even a tiny emergency fund is better than nothing.
Commit to putting away a set amount on a regular basis, such as $100 a month or $50 a week. Automate your savings with a separate direct deposit that puts a flat amount or a percentage of each paycheck in the bank. Just ask your employer to set it up.
If you’re self-employed, create a recurring transfer that moves money from your checking into a savings account on a monthly or weekly basis. Out of sight means out of mind.
If money is tight, try working overtime, getting a second job, or starting a business on the side. It doesn’t have to be forever—just until you reach a savings goal. I recommend having a minimum of $1,000 on hand; however, working up to three to six months’ worth of living expenses is the best goal.
2. Forgetting about retirement
It can be difficult to think about your golden years when you’re a new graduate or in an entry-level job. But when you start investing early, you lock in your ability to grow rich. In fact, it’s almost like getting your retirement at a fire sale.
One of the most important factors in how much you accumulate depends on when you start investing, even if you don’t have much to invest.
One of the most important factors in how much you accumulate depends on when you start investing, even if you don’t have much to invest. Getting an early start allows your money to compound and grow exponentially over time.
Let’s compare two people who each invest $250 a month with an average annual 7% return. If Sam starts at age 25, he’ll have over $650,000 by age 65. But if Lisa doesn’t get started until age 45, she’ll only have $130,000 by her 65th birthday. To end up with as much as Sam, she’d have to invest $1,260 per month.
So, don’t delay making…
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