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10 Habits That You Don’t Realize Are Costing You

10 Habits That You Don’t Realize Are Costing You

You may not realize it, but some things you do habitually can make you lose money. Let’s see what those costing habits are and how we can reverse them.

1. You are a chronic complainer

If you always see the bad side, then you might not see the opportunities around you. When you miss opportunities, you inevitably lose money.

For example, if you are too busy complaining to yourself about how your co-worker sucks, you might not think that you would be a great fit for that new project that just came out. Yes, the one that would boost your resume and possibly lead to a promotion. Opportunity lost.

2. You don’t exercise

Here’s a weird benefit of exercise: people who exercise at least three times a week make 9% more than their non-exerciser coworkers.

Not already exercising? Keep your chin up. A habit-making program like Exercise Bliss could start forming you into a regular exerciser starting next Monday.

3. You think you would never spend this much money, and then spend it

My friend and NYT best-selling author Ramit Sethi likes making fun of people who think they will never spend, e.g. $30,000 on a wedding. But when time comes, and it’s their turn to get married, they spend it.

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I’m not criticizing spending money on your wedding here. I’m just saying that had you accounted for the “having a big wedding” scenario, you might have saved more in the past, and hence not need to get into credit card debt.

4. You don’t negotiate

From negotiating the price of your car, to negotiating your salary, you have a lot of potential to save thousands of dollars. Yet beware, negotiating is not something most people are skilled at. I recommend buying books and then spending 1000x more time actually practicing the books’ teachings with a friend.

That’s how you’ll walk into a negotiation with confidence and ready to tackle anything that comes your way.

5. You think short-term vs. long-term

We often don’t really take into account the effect of our actions in the long run. For example, you not negotiating a $5k increase in salary does not just cost you $5k this yea, but maybe next year as well.

In your next job interview, the employer will try to pay you according to your past salary. Your negotiating position will start from $5k less than what it could have.

And that just compounds as years go by. Thousands of dollars lost, because of an innocent, missed $5k negotiation.

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6. You think “I can’t do it” instead of “How can I do it?”

You can make more money at your current job. You can negotiate more, or improve your skills and then ask for a raise.

Or, you could make more money on the side. Or, you can start your own business.

The options are infinite. The more you’re stuck on “can’t”, the more you’ll be losing money that you could have earned had you not had this bad “can’t” habit.

Start with Appsumo’s Make your first dollar, and you might be surprised with the results.

7. You avoid saying “no”

Your sister asks you for money. She never gives the money back, but you still just can’t say “no.”

You keep lending money, or buying dinner for your friends, just because saying “no” is easier than paying. I’m not saying that “no” should come easy. But I am proposing to be conscious about why you do what you do.

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Regardless of whether you are a guy or a girl, I definitely recommend the book Lucky Bitch by Denise Thomas. Those unconscious patterns will rise to the surface right away!

8. You confuse your account balance with your self-worth

The balance on your account is just a number. Yet, we tend to be emotional with that number. When this balance is not up to our standards, we may feel shame and self-pity.

That’s exactly what overweight–or even thin–people feel when on the scale. The number on the scale feels like it describes their self-worth, when it doesn’t!

The result of this confusion is that you might be afraid to even open up those new bills. Or, you might avoid dealing with your debt because it’s just way too scary to do so.

But the good news is that it’s just a number–it doesn’t have anything to do with who you are.

9. You don’t take your emotions into account when paying off debt

Not knowing how to pay off your debt can hold you back and make you pay it off more slowly. Man vs. Debt advises: start with the debt that you most want to get rid of.

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Not the debt that costs you the most, the debt that you really want to cross of your list. Why? Because your emotions matter. Because if paying off your debt doesn’t give a feeling of relief, then you’re just not going to be as good at it.

10. You buy stuff without understanding why

In Money: A Love Story author Kate Northrup urges us to understand what made us make each purchase. First, we look at our credit card statement. Were our purchases good ones, or are there any purchases that we would have been better off without?

Once we complete this step, we move on to step two. How did we feel when we made each purchase?

If you actually do this step, you might find out that the purchases you made while feeling bad, needy, or lacking, are not the ones you are proud of.

Next time you are about to buy something that you MUST have, ask yourself: “Why do you really want this?” Are you, e.g., buying a coat because you actually need it, or are you buying a coat in the hope that your new friends will like you better?

Now it’s your turn to let me know: Do you have any of the above costing habits? If yes, what will you do to reduce it, or even better, get rid of it?

More by this author

Maria Brilaki

Maria helps people create habits that stick not just for a month or two but for years and decades.

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Last Updated on September 2, 2020

How to Set Financial Goals and Actually Meet Them

How to Set Financial Goals and Actually Meet Them

Personal finances can push anyone to the point of extreme anxiety and worry. Easier said than done, planning finances is not an egg meant for everyone’s basket. That’s why most of us are often living pay check to pay check. But did anyone tell you that it is actually not a tough task to meet your financial goals?

In this article, we will explore ways to set financial goals and actually meet them with ease.

4 Steps to Setting Financial Goals

Though setting financial goals might seem to be a daunting task, if one has the will and clarity of thought, it is rather easy. Try using these steps to get you started.

1. Be Clear About the Objectives

Any goal without a clear objective is nothing more than a pipe dream, and this couldn’t be more true for financial matters.

It is often said that savings is nothing but deferred consumption. Therefore, if you are saving today, then you should be crystal clear about what it’s for. It could be anything, including your child’s education, retirement, marriage, that dream vacation, fancy car, etc.

Once the objective is clear, put a monetary value to that objective and the time frame. The important point at this step of goal setting is to list all the objectives that you foresee in the future and put a value to each.

2. Keep Goals Realistic

It’s good to be an optimistic person but being a Pollyanna is not desirable. Similarly, while it might be a good thing to keep your financial goals a bit aggressive, going beyond what you can realistically achieve will definitely hurt your chances of making meaningful progress.

It’s important that you keep your goals realistic, as it will help you stay the course and keep you motivated throughout the journey.

3. Account for Inflation

Ronald Reagan once said: “Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hitman.” This quote sums up what inflation could do your financial goals.

Therefore, account for inflation[1] whenever you are putting a monetary value to a financial objective that is far into the future.

For example, if one of your financial goal is your son’s college education, which is 15 years from now, then inflation would increase the monetary burden by more than 50% if inflation is a mere 3%. Always account for this to avoid falling short of your goals.

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4. Short Term Vs Long Term

Just like every calorie is not the same, the approach to achieving every financial goal will not be the same. It’s important to bifurcate goals into short-term and long-term.

As a rule of thumb, any financial goal that is due in next 3 years should be termed as a short-term goal. Any longer duration goals are to be classified as long-term goals. This bifurcation of goals into short-term vs long-term will help in choosing the right investment instrument to achieve them.

By now, you should be ready with your list of financial goals. Now, it’s time to go all out and achieve them.

How to Achieve Your Financial Goals

Whenever we talk about chasing any financial goal, it is usually a two-step process:

  • Ensuring healthy savings
  • Making smart investments

You will need to save enough and invest those savings wisely so that they grow over a period of time to help you achieve goals.

Ensuring Healthy Savings

Self-realization is the best form of realization, and unless you decide what your current financial position is, you aren’t heading anywhere.

This is the focal point from where you start your journey of achieving financial goals.

1. Track Expenses

The first and the foremost thing to be done is to track your spending. Use any of the expense tracking mobile apps to record your expenses. Once you start doing it diligently, you will be surprised by how small expenses add up to a sizable amount.

Also categorize those expenses into different buckets so that you know which bucket is eating most of your pay check. This record keeping will pave the way for cutting down on un-wanted expenses and pumping up your savings rate.

If you’re not sure where to start when tracking expenses, this article may be able to help.

2. Pay Yourself First

Generally, savings come after all the expenses have been taken care of. This is a classic mistake when setting financial goals. We pay ourselves last!

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Ideally, this should be planned upside down. We should be paying ourselves first and then to the world, i.e. we should be taking out the planned saving amount first and manage all the expenses from the rest.

The best way to actually implement this is to put the savings on automatic mode, i.e. money flowing automatically into different financial instruments (mutual funds, retirement accounts, etc) every month.

Taking the automatic route will help release some control and compel us to manage what’s left, increasing the savings rate.

3. Make a Plan and Vow to Stick With It

Learning to create a budget is the best way to get around the uncertainty that financial plans always pose. Decide in advance how spending has to be organized

Nowadays, several money management apps can help you do this automatically.

At first, you may not be able to stick to your plans completely, but don’t let that become a reason why you stop budgeting entirely.

Make use of technology solutions you like. Explore options and alternatives that let you make use of the available wallet options, and choose the one that suits you the most. In time, you will get accustomed to making use of these solutions.

You will find that they make it simpler for you to follow your plan, which would have been difficult otherwise.

4. Make Savings a Habit and Not a Goal

In the book Nudge, authors Richard Thaler and Cass Sunstein advocate that, in order to achieve any goal, it should be broken down into habits since habits are more intuitive for people to adapt to.

Make savings a habit rather than a goal. While it might seem to be counterintuitive to many, there are some deft ways of doing it. For example:

  • Always eat out (if at all) during weekdays rather than weekends. Weekends are more expensive.
  • If you are a travel buff, try to travel during off-season. You’ll spend significantly less.
  • If you go shopping, always look out for coupons and see where can you get the best deal.

The key point is to imbibe the action that results in savings rather than on the savings itself, which is the outcome. Focusing on the outcome will bring out the feeling of sacrifice, which will be harder to sustain over a period of time.

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5. Talk About It

Sticking to the saving schedule (to achieve financial goals) is not an easy journey. There will be many distractions from those who are not aligned with your mission.

Therefore, in order to stay the course, surround yourself with people who are also on the same bandwagon. Daily discussions with them will keep you motivated to move forward.

6. Maintain a Journal

For some people, writing helps a great deal in making sure that they achieve what they plan.

If you are one of them, maintain a proper journal, where you write down your goals and also jot down the extent to which you managed to meet them. This will help you in reviewing how far you have come and which goals you have met.

When you have a written commitment on paper, you are going to feel more energized to follow the plan and stick to it. Moreover, it is going to be a lot easier for you to track your progress.

Making Smart Investments

Savings by themselves don’t take anyone too far. However, savings, when invested wisely, can do wonders.

1. Consult a Financial Advisor

Investment doesn’t come naturally to most of us, so it’s wise to consult a financial advisor.

Talk to him/her about your financial goals and savings, and then seek advice for the best investment instruments to achieve your goals.

2. Choose Your Investment Instrument Wisely

Though your financial advisor will suggest the best investment instruments, it doesn’t hurt to know a bit about the common ones, like a savings account, Roth IRA, and others.

Just like “no one is born a criminal,” no investment instrument is bad or good. It is the application of that instrument that makes all the difference[2].

As a general rule, for all your short-term financial goals, choose an investment instrument that has debt nature, for example fixed deposits, debt mutual funds, etc. The reason for going for debt instruments is that chances of capital loss is less compared to equity instruments.

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3. Compounding Is the Eighth Wonder

Einstein once remarked about compounding:

“Compound interest is the eighth wonder of the world. He who understands it, earns it… He who doesn’t… Pays it.”

Use compound interest when setting financial goals

    Make friends with this wonder kid. The sooner you become friends with it, the quicker you will reach closer to your financial goals.

    Start saving early so that time is on your side to help you bear the fruits of compounding.

    4. Measure, Measure, Measure

    All of us do good when it comes to earning more per month but fail miserably when it comes to measuring the investments and taking stock of how our investments are doing.

    If we don’t measure progress at the right times, we are shooting in the dark. We won’t know if our saving rate is appropriate or not, whether the financial advisor is doing a decent job, or whether we are moving closer to our target.

    Measure everything. If you can’t measure it all yourself, ask your financial advisor to do it for you. But do it!

    The Bottom Line

    Managing your extra money to achieve your short and long-term financial goals

    and live a debt-free life is doable for anyone who is willing to put in the time and effort. Use the tips above to get you started on your path to setting financial goals.

    More Tips on Financial Goals

    Featured photo credit: Micheile Henderson via unsplash.com

    Reference

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