When asked about bad habits, people commonly think of items like nail biting, avoiding eye contact, or late-night snacking. However, there are also several everyday financial habits that, like these, may seem harmless, but can have bigger impacts—particularly as it relates to your financial plan.
Knowing what they are and how you can avoid them can help set you up for financial success.
Emotional spending
It’s no secret that your emotions can play a big role in your finances. Money can impact our stress levels, mental health, and personal relationships. From instant online purchases and “bargain” shopping in-store, to stumbling onto the car or home of your dreams, we’re constantly provided with opportunities to “make ourselves happier” with purchases. Unfortunately, in many cases, people discover the trade-off that comes with the spending and that happiness is short-lived.
When these opportunities arise, it’s important to recognize them in the moment, and to not let your emotions drive your decision. This is particularly important for large purchases. If you’re contemplating a significant ticket item, consider talking with your financial partner before making a purchase that could significantly affect your financial goals. This partner can help you objectively determine if the purchase aligns to or deviates from your short- or long-term plan.
An unbalanced asset sheet
This is basically the classic example of putting all your eggs in one basket. When there’s success in one financial path, it’s natural to want to continue investing in that area. For example, if someone has experienced success in real estate, they may want to purchase more properties. However, more is not always better as this can lead to becoming too heavily allocated in one area and open you and your finances up to risk.
As such, it’s important to talk with your financial partner about how you should diversify as your assets grow. Review your portfolio with your financial team on an ongoing basis to ensure you’re still investing in areas you like, that they are consistent with your risk tolerance, and they are in service to your established goals.
Not using technology to your advantage
While the ease of credit card swipes and instant digital app payments can contribute to overspending, it can also safeguard against it. Turn on alerts based on your specific needs. If you know you usually overspend in one area, set up a budget and notification, so when you are close to reaching or exceeding your set limit, you’ll be alerted and can adjust.
Your bank or credit card statements should also be able to create a report that shows your spending categories so you can fully understand where your dollars are going every month. Make it a practice to review and analyze this information to catch any overspending challenges early.
Skipping a financial review
One key factor to financial success is regularly checking in on your finances. Sit down with your financial partner annually to review your financial goals and spending habits. Talk about big purchases you would like to make and if your savings accounts are on target. This annual review can also be a strategic time for you to evaluate your investment strategy and determine if you need to make any adjustments. Circumstances, needs, and markets all change – and you may need to change with it. Being proactive and diligent with your reviews will keep you well-informed and could be the difference in keeping up or falling behind in your plans.
These are a just a few common habits that can derail your finances. The main point is to be aware and mindful of your financial habits and to lean on your financial partner for guidance and planning. Doing so can help you identify and understand your unique behaviors and create a plan to ensure you see the financial success that you want.
UMB Private Bank believes your real priorities lie beyond your net worth. This belief guides our approach in building our relationship with you. We understand you, not just your money, so we can better personalize solutions to meet your unique goals. Learn more about how we serve you at our website.
