It’s the start of a new year and a great time to think about improving your relationship with your money. Perhaps you want to invest more, spend less, or create a budget.
As you think through the improvements you need to make, consider the following pitfalls that could hinder your progress towards building your wealth and financial net worth.
Here are seven mistakes to avoid:
1. Impulsive spending
This is a big one. Impulse shopping or frivolous spending may be driven by your emotions. This is totally normal. We’re human and we have emotions. A study revealed that 95 percent of our purchase decision making happens in the subconscious mind.
However, overspending and allowing your emotions to dictate your wallet can be a slippery slope. You could easily end up in unnecessary debt, which may hinder your ability to save and grow your overall net worth.
Action steps to help curb emotional spending
Impulsive spending is a hard-to-break habit that may prevent you from reaching your financial goals. If you’re finding that your emotions are driving your purchases and are having a hard time controlling it, consider taking the following six action steps to help you.
Action step 1: Acknowledge the problem. A good way to stop reasoning with yourself is by looking through the last two or three months of your spending. Look for purchases at retail stores, restaurants, spontaneous trips, and anything that might be included in impulse spending.
Action step 2: Identify the emotional triggers. Think about what prompted you to spend at that moment and write it down. Note these experiences so you can start to become more aware of them.
Action step 3: Is it a need or a want? The next time you find yourself wanting to spend impulsively, ask yourself if it’s something you need or want. Did you need this item before you walked into the store? If not, you probably don’t need it.
Action step 4: Set a small budget for unnecessary purchases. This is more of a mental trick than anything else, put away $10 or $20 a week for a guilt-free budget. Once you’ve accumulated some funds at the end of the month, you can splurge on whatever item you want to purchase. Just remember to stick to this budget and don’t spend beyond what you have in your account.
Action step 5: Postpone your purchase for up to 24 hours. Leave the item in the shopping cart and sleep on it. Chances are when you wake up the next day, you may have changed your mind.
Action step 6: Unsubscribe from all of your mailing lists, newsletters, and promotions from retail and online stores.