A lot of times, we don't think we have the money to do certain things, especially buy a house, but I guarantee you if you take a deep dive into your finances, you'll find out there's a lot of money there you're wasting.
Most people, even me, have some pretty bad money habits. We blow money frivolously on things we want without even thinking but when it comes to saving and spending money on things we need, we are hesitant and overthink everything. Just think about all the times we go out with friends for brunch, take trips and do retail therapy without even a second thought. If we don't have the money on hand, we'll swipe our high interest credit cards without even blinking, but when it comes to buying a house, we get all skeptical. Yes, we may have some bad spending habits, but it's not something that can't be fixed and I'm going to give you some tips to get you on the right spending track.
Bad Habit #1:
Taking on high debt:
First bad money habit most of us have is taking on high interest debt. This mainly comes from credit cards or high interest car loans. Here is a tip to tackle those high interest rates and pay them off sooner.
Use the debt snowball method to pay down debt. What this is is when you pay off your debt by starting with the lowest balance and working your way to the largest balance.
Here's how it works:
Step 1: Make a list of your debts from smallest to largest. Don't worry about the interest rate, just focus on your smallest balance.
Step 2: Make the minimum payments on all your debts except the smallest one. Make a larger payment on this one until the balance is zero.
Step 3: Once your smallest debt is paid off, go to the next smallest debt and add the payment you were paying on the smallest debt you just paid off to the next smallest debt until it's gone.
Step 4: Repeat this which each debt until they're all paid in full and this is how you get out of debt.
Here's an example:
1. $5,000 credit card debt - $100 payment
2. $8,000 hospital bill - $150 payment
3. $20,000 car note - $450 payment
4. $50,000 student loan - $250 payment
Using the snowball method, you would start off by tackling the lowest debt you have which in this example is your credit card debt. You would make the minimum payment on all your other debts except your credit card payments. The minimum payment is $100, but you could make an extra $100 or more plus on the credit card payment and continue making minimum on all the other debts until this one is down to zero balance.
Once you get your credit card paid off, you'll start on the hospital bill and make the minimum payment on that plus what you were paying on the credit card bill you no longer have and continue until it's at a zero balance.
You will continue this through all your debts and by adding any additional money you were paying on debts already paid off to the next one to get it paid off quicker. If you're really wanting to get your debt down even quicker, picking up some side hustles that will at least cover what you're wanting to pay extra a month on your debts will definitely help you get rid of it faster and won't affect any other money you're making from working.
Here are a few side hustles you can do to help you make an extra $500+ a month to help you clean up your debt using the snowball method.
DoorDash
GrubHub
Spark - Use my referral code MWBIJW5S
GoPuff
Amazon Flex
links are referral links and commission is paid
There are many others, but these are just a few I've used personally in the past and sometimes still do.
Bad Habit #2
Impulse buying:
I know we all work hard and want to treat ourselves, but when you're working on buying a house, impulse buying is something you have to put off for a while.
In order to fix this bad money habit, it's a good rule of thumb to set a budget and stick to it. Some will say "it's easier said than done", but it's really only as hard as you make it.
Bad Habit #3
Not having an Emergency Fund:
Next is not saving for a "rainy day". One things for sure, things will happen and when they do they seem to happen when you don't have money to take care of them. This is why it's important to set money aside for those emergencies.
One thing my mom taught me to do and that's to always pay myself first. At first, I didn't understand exactly what that meant or looked like, but I've gotten way better at doing so. I mean let's be for real, we're the ones putting in all the work. Getting up and hitting the pavement and going to work daily whether we want to or not just to send all our money to the bill collectors. So, pay yourself first.
Decide on an amount to set aside monthly and stick to it. My personal monthly savings goal this year is to save $1000/month. I didn't get started as early in the year as I wanted to, but I started this month and am going to stick to it regardless. I actually am adding more so I can catch myself up to the amount I should be at by the end of the year.
Bad Habit #4
Not having a budget:
Another downfall when it comes to saving it not having a budget. By not having a budget, you tend to spend money without thinking about it and furthermore knowing where it's going.
A good way to make a budget is by first starting off writing down your take home pay. Next make a list of all your debts including rent/mortgage, utilities, car payments, credit cards, student loans, etc. All the money that's going out the door monthly.
After doing this, see how much money is left over once all bills have been factored in. This is your discretionary income. Once you figure out how much discretionary income you have left, you'll know exactly how much you can save for your emergency fund.
Happy saving and getting out of debt!!!
Getting out of debt is hard because we make it hard. If we focus and use a great deal of discipline, it can be done in no time.
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