A lot has changed economically since 2021. The Federal Reserve Bank is restricting monetary conditions, job growth is slowing down, company earnings and forecasts are trending down, and all three major indexes are also down year-to-date. 2022 is forecasted to be quite different from 2021. With this in mind, you’ll have to adapt to the new economic landscape to ensure a fruitful financial future. Below are 5 money habits to drop in 2022.
1. Spending More Than You Earn
Spending more than you earn seems like an obvious recipe for financial ruin. However, this is the reality for many average Americans. It’s easy to know if you fall in this group by assessing your reliance on debt to make ends meet (credit/loans excluding those for mortgage and business). Another way to determine if you spend more than you earn is your reliance on payment systems such as Klarna to purchase products. Living below your means is an acquired skill that can ensure a comfortable financial future. If you find that you spend more than you earn each month, this is one of the money habits to drop in 2022.
2. Impulse Shopping
Have you ever gone to Target to pick up one item and left with five? Well, you were a victim of impulse shopping. Impulse shopping is one of the most common reasons people fail to meet their financial goals. It’s easy to see why when companies spend millions per year on marketing and promotions to attract their targeted buyers. If you continue impulse shopping not only will you eventually end up broke, but also in overwhelming debt.
To overcome your impulse shopping habit, you’ll have to practice self-control when you’re shopping. Make a list with the objective of only purchasing what is on that list. If you don’t have enough self-control in the store, try shopping online more often so you don’t get distracted by product displays or persons trying to upsell. Soon you’ll find that your discipline in shopping will spread to other areas of your life.
3. Accumulating Careless Debt
Careless debt is not an official finance term but rather something I made up. It’s when people go into excessive credit card debt for no reason other than they feel like getting something they cannot afford. While in the beginning the debt seems manageable, increasing your debt over time can cause financial problems in the future. Especially if you’re borrowing at high interest. If you find you have careless debt, consider dropping that habit in 2022.
4. Not Budgeting
Budgeting is tracking your income and expenses over a specified period (Investopedia). The best way to prepare for unpredictable life events, improve your finances and avoid excessive debt is by budgeting. A home budget does not have to be overly complicated. Instead, you can tailor your budget to suit your needs and lifestyle. Once you start budgeting, you’ll have greater insight into your spending habits and where you can cut back. Also, remember to set a budget goal as this will keep you motivated and consistent.
5. Trying To Please Others
A common financial mistake between all generations of people is spending to fit in or to please others. Even though we are innately wired to want to fit into social groups, it should not come with a heavy financial cost. If you have a habit of doing this your money will be better spent trying to find out why you feel the need to try so hard for acceptance. Once you break this habit, you’ll have more control over your finances thus allowing you to engage in activities that you enjoy with people who accept you for who you are. Trying to please others is one of the top money habits to drop in 2022.
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