examples-of-bad-spending-habits-that-can-kill-your-retirement

Examples of Bad Spending Habits That Can Kill Your Retirement

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Consumerism has been a growing part of the American culture for decades, and it doesn’t show any signs of slowing down. Whether we are using our phones, watching TV, or browsing social media, there are brands all around us asking us to buy. Resisting the impulse to spend can be very difficult. After all, we are being re-targeted by marketers daily. It seems as though we can’t browse the internet without your favorite brand popping up in an ad. Marketers are smart. They know what makes people want to buy.

But, spending now without full clarity of your financial situation can have damaging effects to how you save for later.

This is the conundrum we are faced with every day. We make a certain amount a year and we have basic expenses, and somewhere in between, we’re supposed to put money aside for emergency situations, retirement, college funds and more!

And when our retirement is years away, it’s very difficult to make saving for this a priority. Why should you care? Why should you pay attention to your spending habits now? Because having clarity on how you spend your money early on will shape your entire financial future.

It’s never too late to get started. With that in mind, here are some bad spending habit examples to avoid now, so you can enjoy a comfortable retirement later.

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The “Need It Now” Mentality

It’s very hard for the average person to think about money without getting emotional about it. In fact, advertisers are counting on those emotion to work in their favor, and a lot of research goes into making sure that happens.

Take a look at the average toy commercial. Advertisers are hoping parents will feel some obligation to provide their children with toys that will make them smarter, more innovative, more creative.  Meanwhile, in that exact same commercial, kids are being told that all of their friends probably already have this toy, and that creates the uncomfortable sense of being left out. In other words, what is being sold is emotional fulfillment, not necessarily the product on screen.

This can sneak up on people in many different ways. For example, advertisers can create a real sense of urgency when encouraging you to buy the latest model of their product. This is especially successful with technology and fashion. You want the newest, the best, the most noticeable thing, and you are told that not having that will somehow make you “less than.”

Resisting the urge to purchase based on emotion can take some practice. Like I said, everything from the lighting in the commercial, to the way the product is displayed in-store are fine-tuned to create an emotional response in you, the consumer. Being aware of these tactics can be a good first step, but there’s still some more work to do.

Racking Up Credit Card Debt

So, you have purchased the latest and greatest, and you have a real sense of keeping up with the Joneses – but are you sure you can actually afford this? What happens if you’ve impulse purchased your way through your entire checking account, and are now coming up short for your necessary expenses?

This is where the credit card companies step in, but what they are offering is not an easy way out. In fact, for millions of people, credit cards are the main reason they are struggling with debt.

Credit cards are essentially offering you short-term loans, with terrible interest rates. But the convenience with which we can swipe cards for goods and services obscures the whole idea of a loan and a loan repayment. Think of it this way: would you go to your bank and sign loan paperwork before heading out to the grocery store? Probably not. But that is essentially what you’re doing when you pay for food with a credit card.

Now, it’s not that credit cards have no place in your life. They often do. The problem is that not many people use them the way they ought to be used – mainly for large, one-time purchases, or unexpected emergencies. If your car suddenly needs a new timing belt, or if a tree in your front yard needs to be taken down by professionals, these are expenses that you probably didn’t budget for. In these cases, a credit card transaction could help you.

What credit cards are not meant to do is bridge the financial gaps that appear between paychecks. And of course, if you owe large credit card payments each month, that may be eating into your income, meaning you have to continually put more and more debt on your credit card.

If you have credit card debt, one of the most important things you can focus on is paying it off. You could be losing a lot of potential retirement savings to high interest rates.

Having No Spending Plan

Thanks to online banking software, fewer people are using their pen and paper checking account registers. Debit cards may be swiped five or six times a day for various expenses, and it becomes very easy to lose track of how much of your money is going out, and how much is coming in.

In other words, when you are not forced to sit down and reconcile your accounts each day, you may begin to think you have more money than you do. Ask anyone who has ever been hit with an overdraft charge (or three) from the bank. They probably didn’t see it coming.

The easiest way to get on top of this is to come up with a spending plan. You’ll need to account for all of your income, all of your bills and expenses, and then figure out how much you can spend each month, and how much you can save.

You can attempt to do this on your own, but speaking to a financial advisor can help for a number of reasons. First off, like I mentioned earlier, it is extremely difficult for people to take emotion out of the equation when it comes to their money. Having a professional help you means you get an objective breakdown of your spending. Secondly, a professional will be able to come up with a workable plan for you to follow. You will speak together about your goals, and your spending plan can be structured in such a way that allows you to pursue them with confidence. Lastly, you can find smarter and more profitable ways to invest your savings, and get the most out of your retirement plan.

Remember, this advice goes for people of all ages. Sure, younger people sometimes struggle with these bad spending habit examples, but that does not mean that people who are close to, or even in their retirement are exempt from making these mistakes. For a more in-depth look at how you can maximize your retirement savings, and enjoy the life you want, please download our free guide called Back to Basics.

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