I hate to be the bearer of bad news, but your own worst financial enemy might be yourself.
There are a lot of people who sabotage their own finances, often without being aware that they’re doing it.
Sometimes this is the result of generally being inattentive to money, while other times, it’s the result of having negative thoughts, emotions, or habits around finances.
Here are 5 ways you might be shooting yourself in the foot.
1. Living Above Your Means
If you find yourself anticipating your next paycheck to pay your bills, you’re living beyond your means. We’re brought up in a society that teaches us that we’re entitled to buy items right away.
If we see something we like, we can tell ourselves we deserve it, and advertisements reinforce this belief. The reality is, you don’t really deserve anything, at least not in a material sense of the word.
2. Not Saving For Retirement
Many younger people make the mistake of thinking that they don’t need to bother saving for retirement until they reach 40. By that age, they look back and realize that they should’ve started 20 years ago.
Begin saving for retirement the minute that you get your first paycheck. If it’s too late for that, then start today. Ideally, you should be saving at least 15% of your income towards retirement, including any employer matches.
If that’s out of reach for you, start by at least getting your full employer match and then slowly increase your savings by an additional 2% to 3% per year.
3. Not Having an Emergency Fund
Plenty of people don’t have a fund that they can tap for financial emergencies, including medical bills, car repairs, home repairs, and losing a job.
Create a fund that represents at least three to six months of your basic expenses. If you lose your job in the same month that your car’s engine explodes, you’ll have money that you can tap.
4. Not Monitoring Your Expenses
You may not necessarily need a detailed line item budget. It’s okay to have one, but that’s not the only option you have.
You should, however, at least be paying attention to how your money is flowing. What percentage of your income are you spending on housing? How much are you spending on food, including both groceries and restaurants? What about travel? How much do you spend there, and most importantly, how much are you saving? You should know the answers to all of these important questions.
5. Spending on Bad Habits
Plenty of people have a habit of spending too much money on particular vices. Your vice might be alcohol, clothing, cigarettes, restaurants, or even a cable television package that far exceeds what you really need.
Your vice might even be something that society generally interprets as positive, like spending too much money on fitness club memberships. Spending some money on these areas is great, of course. But if you have four gym memberships, and you’re only using one, it’s time to reconsider.
I know someone who has memberships to two gyms, one Crossfit studio, and one yoga studio. She only uses one of these regularly.
Regardless of what that bad habit is, target it and focus your energy on eradicating it.
The faster you can wipe bad habits from your life, the brighter your financial future.