By Mary Hunt Money a little tight these days? You might assume it’s due to rising costs, tightening credit and the fact you haven’t had a raise in like forever. But truthfully, if your basic needs are being met, problems you’re having are more likely a result of bad money habits you’ve picked up – behaviors you’ve repeated so often they’ve become almost automatic.

But don’t despair. In the same way you picked them up, you can replace bad habits with good ones: Stop the old behavior and consciously repeat the new one so often that it becomes an almost automatic response.

Bad Habit: Living without a Spending Plan

Spending money without a plan has to be the mother of all bad money habits. It’s like driving blindfolded. You don’t know where you are and can’t see where you’re going, so you don’t know when to stop.

walletPre-spending your paycheck on paper (also known as a budget) is the way to remove the blindfold so you can see what’s going on. A Spending Plan is absolutely essential if you want to be in control of your finances. It lets you see the flow of your money—how much you make and how much you spend. That allows you to make intelligent decisions about how to manage your hard-earned cash.

Break the habit: Make a list of your fixed monthly expenses like the rent and car payment. Next, estimate your variable expenses like utilities, food and gasoline. Set a little aside for occasional expenditures like clothes, appliance repairs and vacations. Tally these known monthly expenses and subtract from your monthly income. Don’t worry if you don’t hit a bullseye the first time out and where your expenses are less than your income. Just keep working at it. Using this information, decide exactly how you will allocate every dollar in your next paycheck. Then stick to your plan no matter what.

A Spending Plan lets you tell your money where to go so you’ll never have to wonder where it went.

Bad Habit: Paying with plastic

Depending on plastic—and I’m talking about both debit and credit cards—to cover your day-to-day spending might be very convenient, but creates a bad habit. You stop noticing how much you’re spending, and that opens the door to overspending. Just the cash in your wallet sets a strict limit on what you can buy. That keeps you more aware.

debit_credit cardsIt’s a fact that we spend more when we pay with plastic, says Robert Frank, professor of economics at Cornell University’s Johnson School of Management. “Forking over cash is a more vivid sensation than the abstract act of promising to pay for something later,” he says. “Paying with plastic allows a person to act more compulsively—having things right now without having to deal with the actual payment, opting instead to push that off until sometime in the future.”

Break the habit: Figure out how much cash you’ll need for the day and put that much cash in your wallet. Leave your plastic in a safe place at home, or put it in a less convenient place in your handbag or wallet. With little effort you’ll become shockingly aware of how often you reach for the plastic.

Bad Habit: Rolling a credit card balance

Credit card issuers know that once they can get you to cross the threshold where you owe more on your credit card than you can pay in a single month, they’ve got you where they want you—paying them interest month after month.

credit card balanceThis can quickly turn into a bad habit because the minimum monthly payment appears to be so affordable compared to coming up with the total balance owing. It’s just easier to make that small payment and then roll the balance month after month. Just know that you’re rolling the equivalent of a snowball that can quickly grow out of your control if you continue to add new purchases, but pay only the minimum payment required.

Break the habit: If you cannot pay the entire balance in a single month, you need to get rid of that credit card. Cut it up so you cannot use it (do not close the account or you could be looking at a big interest rate increase). Now start paying down the balance as rapidly as possible, ignoring the minimum monthly payment amount. Create a payment chart you can look at each day to visualize your progress. Once you achieve a $0 balance, don’t ever allow yourself to charge more than you can easily repay in a single month.

Bad Habit: Waiting until the end of the month to save

It might make sense to pay your bills first and then see how much you have left to put in savings, but that’s a really dumb idea. It will lead to a very bad habit also known as no savings because you will keep doing this same dumb thing month after month, year after year.

Payment DueHere’s the problem: You will never have money left at the end of the month because as long as you have money to spend, something will always come up. Perhaps you’ve noticed that.

Break the habit: You have to pay yourself first before you pay any of the bills. In fact, treat yourself as your most important creditor. Make up payment coupons like you have for your car payment. Or set up an auto bill payment to “Myself.” Now move Yourself to the front of the line so that the very first bill you pay each month is to Yourself. Even if it’s only $25 or even $10 to start with, do it. Over and over again.

You won’t miss money you don’t see, so setting up an automatic deposit into your savings account is a great way to create a good new habit.

Bad Habit: Too many trips to the ATM

You may assume that since you are careful to use only your bank’s ATM (no fees involved), and you’re pulling out money from your checking account (no debt), visiting the ATM is a totally harmless activity. And you would be wrong.

ATMFrequent ATM visits can become a big, fat bad habit that allows money to leak from your life undetected. Here’s the problem: You take out cash, but fail to keep track of where it’s going. That can easily become one $200 drain after another. By the time you get your statement and see that big long list of withdrawals, it’s too late. It’s money under the bridge.

Break the habit: Discipline yourself with a set ATM schedule of no more than one time each week. Period. Once you withdraw cash, tuck it into separate envelopes that mirror the purpose of your withdrawal in the first place: Groceries, Gas, Lunches, Haircut, etc. Spend from the appropriate envelope. And when it’s empty, no more spending until the next fill-up.

Just because you are not paying a fee to withdraw money from an ATM does not mean you’re not blowing through the contents of your bank account with lightening speed.

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