Bad financial habits not only sabotage your savings – they could also sabotage your chances of getting a home loan approved.
Check out these five bad financial habits, and how to fix them, to improve the health of your savings, and ability to get a home loan. (Spoiler alert: there is no mention of giving up the lattes).
Using debt to pay for ‘nice-to-haves’ or bargains
Relatively easy access to credit, along with interest-free hire purchases and interest-free periods on credit cards can lead to more impulsive shopping, because you think you are saving money. However, if you don’t pay off the debt within the interest-free period, then the “bargain” you just scored can rapidly turn into just one more debt you need to pay off.
Before buying that nice-to-have or bargain item, make sure you factor the repayments into your budget, to ensure that you can pay it off before any extra costs kick in.
Not having a budget
While budgeting may seem like a boring word, not having a budget means you might not have good oversight of your finances.
While you can’t predict exactly how much you will spend on everything (such as your power bill which will vary each month), you can accurately account for your fixed costs (rent or mortgage payments), and more importantly, put a lid on those other discretionary and variable costs.
How much do you spend on your groceries each week – or even every day, as you dash into buying a bottle of milk, and end up spending $40? By having an amount budgeted each week or fortnight for groceries, and sticking to it, you should quickly see a difference in your savings.
The longer you put off saving – either for your retirement or a rainy day (or ideally both) – the more you need to put aside regularly.
You’ve probably already heard about the power of compounding interest. Basically, the more time you have to save for something, the less you need to save regularly. If, for example, you have a goal of $5,000, you would need to put aside just over $400 per week for a year – or just over $200 per week if you save over two years.
The sooner you start, the better off you’ll likely be – so even if you can only afford a small amount, why not start now?
Do your cheap family days at the beach usually turn into an expensive café-supplied lunch? Be aware of the additional costs you accumulate when you don’t plan ahead for family outings, road travel or other social occasions.
It is probably still cheaper to go to the supermarket and pick up a French stick and fillings, as well as bottles of water, than it is to buy prepared sandwiches and bottled drinks from a café. Plus, don’t forget to factor the cost of social activities into your budget.
Not keeping the ‘wants’ under control
Tempted to buy yet another pair of jandals for Summer? Consider whether you really need these. Reducing the amount of money you spend on ‘upgrades’ or ‘keeping up with the Joneses’ will give you more money to spend on things that are important to you – or save, so that you can pay for those unexpected car repairs without stressing out the finances.
By making a budget and sticking to it as much as possible, not only will you reduce the frittering. You will also find you have more money saved for a rainy day, or (why not?) those genuine must-have items.
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