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Unhealthy financial habits creep into our lives before we know it. If you step back and take an objective view of your spending habits, you might find things that are costing you.
Let’s start with an unhealthy financial habit caused from one of the most tempting consumer goods sold today, the smart phone.
Bad Financial Habit #1, The Not so Smart – Smart Phone
Do you wait in line so that you can get the latest greatest smart phone?
How much are you really gaining in features by buying the just released model?
Think about the value proposition here.
My first iPhone was the 3GS. I use that phone for years before upgrading. I would get laughed at that parties when people saw it because I was years behind the upgrade wagon.
Eventually I was forced upgrade when all the apps ran so slowly that the phone would barely function. I could still make calls and retrieve email but that was about it. Maybe I took it too far but when you calculate the cost per month that I paid for that phone – it was peanuts.
You can still have really high quality electronics, even current models by following a few best practices.
For one, don’t buy right away. You will pay a premium for brand-new current models.
A better financial approach is to have a little bit of patience.
Why does this help?
By exercising some patience and waiting a few months and to buy the current model, you can get a recent item refurbished with a warranty. Inevitably people return items that have nothing wrong with them.
You can save 30% or more by letting someone else take the hit on brand-new product but still be protected by a factory warranty.
Still want a new iPhone?
Careful timing can score you a new iPhone. Prices drop a lot just after a new version is announced. The prices tend to decline with age with a sharp drop at the version change.
So if buying used bothers you, then you have a choice.
Next bad financial habit – new cars.
#2, Buying New Cars
As you already know, cars lose value as soon as you drive them off lot. It’s not some trivial amount like $500, it’s thousands of dollars.
The great thing about this is that you can use that depreciation to your advantage.
Instead of buying brand-new, why not buy a car with a few thousand miles on it?
It’s possible to buy something that is like new and nobody would know that you bought a “used” vehicle. “Used” is a social stigma you might not want to have, but the thing is that your friends are not the ones paying your bills.
When they do please let me know.
Just a personal example, but I bought a used Mercedes Benz that had over 100,000 miles on it and kept it for 10 more years. In the end it had 350,000 miles and finally died 3 miles from the house.
My mechanic said it needed more money in repairs than it was worth so I sadly I let it go. What, I can’t use the same injector for 400,000 miles? Who knew.
Point is that I had a nice, reliable car that didn’t cost that much to own.
Let’s take a look at another example.
#3 – Buying Cheap Instead of Quality
Do you think that being frugal is just buying something cheap?
Cheap is not frugal and very often winds up costing you more then if you bought quality upfront.
Example, disposable plastic for lunches.
Sure, these are dirt cheap on a per use basis, but they are disposable and you have to buy them over and over. A better approach is to buy high quality glass containers with locking lids. There are also many metal containers with quality lids that work great too.
Another example: cheap tools.
When you buy cheap tools for home DIY projects they won’t last very long. A better approach is to buy respected brands that have proven their worth.
Some recommended tool brands include:
- Porter Cable
- Channel Lock
You will spend more money upfront but it will last significantly longer, sometimes for life for things like hand tools. I’m a big fan of Craftsman hand tools. If it breaks, they replace it. Done.
It’s your choice how you are going to spend your money. Don’t throw it away.
#4 – Buying Low Value Gadgets
Take a look at these examples below of some useless kitchen gadgets.
Buying gadgets like these is throwing money down the drain because there are better alternatives that you likely already own.
A couple of these gadgets were so crazy I had to look them up to understand what they were supposed to do. Turns out I don’t need a thingamajig to chop veggies. My chef’s knife will do that just fine.
#5 – Too Busy to Plan for the Future
Life can certainly get hectic but that’s no excuse for not planning for future.
You might feel like there is no time to budget when you have a busy career, kids to feed, and a house to maintain.
As difficult as it may seem, slacking off on your finances could cost you.
Learn how to manage this by scheduling in time for:
- Savings – Consider automatic withdrawals to ensure you are saving regularly.
- Investing – Investing early and consistency pays off. You will need less money to retire if you start early and invest often.
- Paying bills – paying on time works now and in the future. You will have a higher credit score, reduce stress, and normalize your cash flow by paying on time.
- Bookkeeping – Entering in transactions into your financial software.
- Budgeting – Evaluate past transactions and see how they correlate to your expected expenses.
It’s easier to have consistent effort a couple times a week then to wait until you have an overwhelming pile of bills to pay.
Unhealthy financial habits that you do every day can accumulate over time and cause you to lose. Learn how to identify bad habits so that your money goes farther.
Healthy habits give you the freedom to retire earlier with more money while still maintaining your lifestyle. There’s only a fixed amount of money so make the best use of it.