Are Your Financial Habits Just Bad?

By David Ning on 22 June 2010 (Updated 20 June 2011) 17 comments
Photo: redmonkey8

I own one of those electric toothbrushes, and I brush my teeth for the full two minutes that the manufacturer suggests. This is easily accomplished, because the unit comes with a timer, which tells you when 60 seconds have elapsed. It even sends me an indication every 30 seconds so I can further divide the time to brush the four areas of my teeth evenly. I love the idea, but I realize that it's got a flaw — a pretty big one actually. You see, I always start with the top left hand corner, and go clockwise. Without knowing, I always exposed the ones in the top left the most toothpaste, and the bottom left the least. Sorry bottom left!

Another example involves cutting cakes. I always start out with huge pieces, and progressively cut smaller and smaller because I continually overestimate how big each slide should be. My engineering friend once told me that a circle has 360 degrees, so if you want to evenly cut any number of pieces, you just divide 360 by the number of pieces...never mind. This is a personal finance article actually. Way off topic!

Do you do this with your finances?

Luckily, this is never a problem with my finances. I don't ever run out of money a few days before my next paycheck, and I never spend more on the Friday that paychecks come. Disclaimer: I am a business owner and don't receive regular paychecks anymore. But I never had this problem even when I was a salaried employee either.

There are a zillion reasons why this situation hasn't happen to my finances, but here are five few major ones worth discussing.

1. I am conservative.

I am generally a careless person and thus take big risks every once in a while without knowing simply because I haven't thought it through and went ahead to take action anyway, but I definitely try to be conservative at most times. I'm definitely a saver, and that helps me build a big enough cash reserve that weathers any emergencies.

[Click Here for Six Neat Ways to Build an Emergency Fund]

2. I live below my means.

It's simple math. If you always live below your means, then you will never run out of money. The excess is saved, which helps give me comfort that even if something were to happen to my business, my family will be okay.

3. I am a simple person.

Simplicity is not only beautiful but inexpensive to maintain. If you like simplicity, you don't like to accumulate stuff. If you like simplicity, you don't need to buy six different machines that does a similar job. If you like simplicity, you will simply spend less.

4. I love my work.

Enjoying my work as much as anyone would a hobby allows me to spend more time on it than anyone could in a 9-5. When you are thinking about your business all the time, you just don't have much time to think about spending, even if you just got the biggest check ever.

[Find out why a recession is a great time to start a business.]

5. But most importantly, I am happy.

There was a time when I was buying way more than I do now. Eventually, I realized that I was trying to fill an emotional need by making purchases when the root of the problem was simply because I just wasn't happy. I am now happily married and my wife just gave birth to our beautiful girl named Sara. My life is predictable, in the best possible way.

How about you?

There really is no need for me to spend much and money is not really a concern anymore. But how about you? Do you worry about money? Do you find a need to spend more as soon as your paycheck arrives? Why do you think that's the case?

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Guest's picture
Kasey

I've stopped using my debit and credit cards as much as I used to. Went back to using personal checks because I actually have to write down the number I'm spending. Sure-you can still keep track of personal finances using plastic. But who does? I kept falling into the trap of paying for everything I wanted with the flip of my wrist.
Using personal checks like these http://www.checkadvantage.com/ made a big difference!

Read more about the benefits - http://blog.checkadvantage.com/2010/06/10/check-advantage-gets-personal/

Guest's picture

David, I believe number 5, "But most importantly, I am happy." is very important. Most of time we spend a lot of money because all we are simply trying to do is to find happiness by spending.

Guest's picture

So many folks have terrible financial habits that it never fails to amaze me. I see it time and time again. Before people make large financial decisions they need to consult with a professional.

Guest's picture
kt

i also own one of those electric toothbrushes(it was a gift). I was going through my things and i realised that i never use the thing. The first few days, i over used it but with time, i started reverting back to the manual one. If it wasn't a gift it would have been one of those things that i bought just because i wanted it, not needed it. I use it as a kind of marker that i shouldn't buy things without thinking it over and over. I also seem to spend more when money come in but i am learning to control it

Guest's picture

Well, touch-wood I have good financial habits and I feel It is mainly because I do not spend randomly. I think a lot before making a purchase and that saves me quiet a lot of money. I feel impulse buying leads to a very bad financial habit.

Guest's picture

Don't mothball the credit cards, just think "If I don't have the cash to pay for this now, will I have it by the end of the month?" If the answer is no, don't buy it.

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Guest's picture

The key here is to make sure that you are content with your job, life and financial situation. When we are not content we tend to make bad financial decisions. We tend to act more on emotion rather than intelligence.

Guest's picture
GeorgeP

Living below your means is the key to success for sure, even though this might make you feel bad about yourself from time to time. An even better idea is to find a job that gets you a big salary, so that you don't have to make too many compromises.

Guest's picture

my Financial Habits is not good,i always spend all money that i earn.i know i need to save some money for one day i need.thanks to let me know.

Guest's picture
lcd604

I think one of the reasons I can save a bit more money then my peers, comes from the fact that I hate putting my money in depreciable assets. For example, buying an expensive car would bother me to no ends because I know each year I am guaranteed to lose money. My money way will never grow if I spend it this way.

I like watching my money grow and I know its geeky, but I love calculating how much my money will grow if I invest so much today , at this much interest (or growth rate), and compounded over this many years.

But once in a while , you need to treat yourself to that shiny new toy you have been eying ^^

Guest's picture

Living below your means is admirable, but it seems most people have trouble even living at their means. I remember reading a report during the pre-recession era when the real estate boom was still humming along, that the national savings rate was negative. This means that not only are people not saving anything, but that they are spending more then they got. It was obvious this was not sustainable.

I hope people and, myself included, can learn a lesson from this harsh recession and save more money for those inevitable future down turns

Dynamite Resume

Guest's picture
Josh

Very true. I loved the part where you talked about simplicity. Simplicity and satisfaction are very important. Being content with or without money is KEY. Thanks for sharing.

Guest's picture
David

I've also stopped using my credit card because of the high interest rates.
I am actually borrowing money at lendfolio which offers me better rates.
you should check, it was a very profitable www.lendfolio.com

Guest's picture
David

I've also stopped using my credit card because of the high interest rates.
I am actually borrowing money at lendfolio which offers me better rates.
you should check, it was a very profitable www.lendfolio.com

Guest's picture

As you metioned above about living above/below your means... I feel this is one of the biggest contributions to financial troubles. I know many individuals and famlies who live this way. In one sense it gives individuals the motivation to strive to do more and make their money go further. However, more often than not this is a continious downward spiral which inevitably ends up in finanical troube due to individulas pushing the boundaries on their living means.

Guest's picture

It depends person to person, we should maintain our cool while having financial planning.....

Guest's picture

I think my financial habits aren't that bad, though I am not planning anything at all. i just go with the flow sometimes, other times I prefer to step out and so on.