Whether you’re trying to save for retirement or avoid consumer debt, managing your money is one of the most important skills a person can learn. The first step for solving any problem is admitting that it exists. Here are a few glaring signs that you are bad at money management.
6 Sings You’re Bad at Managing Your Money
- You don’t budget: Budgeting is the financial equivalent of showering. You absolutely have to do it. It’s impossible to be good with money if you don’t know where your money is going, what your expenses are and how you are planning on allocating your financial resources. If you don’t have a budget, this should be your very first step.
- You don’t have an emergency fund: Have you ever considered what would happen if your car broke down or you had a surprise medical expense? You need to protect yourself from a situation like this. Take extra work or adjust your lifestyle if you have to. The sacrifice will be temporary and it will help bring peace of mind.
- You make large purchases on impulse: It’s possible to be good with money and still make the occasional snap decision, but if you frequently find yourself taking home a new TV that you didn’t budget for, it’s a bad sign.
- You pay your bills late: If you keep a budget and have an emergency fund it should be very rare for a situation to arise where you can’t pay a bill on time. Waiting can hurt your credit and incur extra fees. Don’t waste your money on fees. Save it for your living expenses and investments.
- You keep a balance on your credit cards: Letting even a small balance sit on your credit card means sinking money into interest rates. You are going to have to pay the balance eventually, so it’s better to knock it out sooner rather than later. Make paying off credit cards a top priority.
- You keep everything in a checking account: It’s possible that you may be in a financial situation where you are still building an emergency account or paying down debts, but as soon as you are able you should start contributing to your savings. Even if it feels like you can only save a tiny amount, you’d be surprised by how quickly wealth can accumulate.
Nobody likes to think of themselves as being bad with money, but if these signs sound familiar it may be an issue. By identifying the problem, you have already taken the first step towards building a plan to help you improve your money management skills.
Kevin D. Judd is a DC bankruptcy lawyer who fights to provide his clients with a gateway to financial freedom.