Screen shot 2013-01-10 at 10.12.30 PMAre you carrying around bad financial habits with you today? Your 20’s are a time to grow, be independent and make a few mistakes. No one expects you to be perfect, but when mistakes turn into bad habits and they begin to sabotage your financial health, it’s time to take a step back and begin making active decisions about your life and your money.

Bad Habit #1: Not sticking to a budget
Creating a budget is the best possible financial advice one can start with. Budgeting means knowing where your money is coming from, where it is going and then planning on how to balance those funds. Yes, of course you will get off track with your budget every now and then, but if it becomes a habit, what is the point of having a budget in the first place? Set a goal and stick to that goal. Your bank account will thank you in the long run.

Bad Habit #2: Not saving enough money
No one likes to think about it, but the reality is, bad luck can strike at any time—like losing your job or getting in a car accident. Protect yourself by setting up an emergency fund. Each month set aside a fixed amount from your paycheck. That way, if something happens, you’ll have a good amount of time to get back on your feet without scrambling for cash.

Bad Habit #3: Splurging on stuff you don’t need
The good news: You found the perfect fall handbag. The bad news: It cost half a month’s rent. When you’re faced with a temptation, put it to the need vs. want test. Ask yourself, “Do I really need this?” If the answer’s no, then step away! I’m not trying to be a “Negative Nancy” here, so if it is something you have been dying to purchase, cut back on things like fast food or dining out to save up for that must have item.

Still seem too hard? Go on a cash diet. Every week, take out just enough money to last you the next seven days! Leave your credit cards at home, and only use cash. It forces you to regulate your spending (needs vs. wants) so you can make it through until the next withdrawal.

Bad Habit #4: Contributing too little to your 401k
Retirement seems so far away, so why do I need to start saving for retirement now? Reality check. These are the accumulation years! Putting money aside for your 401k now is one of the most important things you can do to set yourself up for later. According to the Wall Street Journal, “If you save $10 a day at age 25, you’ll have more than $1 million by age 65, assuming an 8% annual rate of return. If you start at age 35, you’ll have $445,000. At age 45, you’ll only have $180,000.” I don’t know about you, but I’d rather have $1 million.

For a visual understanding of how much you can save for retirement, click here!

Bad Habit #5: Spending money without tracking it
I’m just going to throw it out there…. I am extremely guilty of this. In fact, in the last month I had about 3 checks come out that I forgot to track and of course they all decided to withdrawal from my account on the same day. Almost $400 later, I realized I need to start tracking my money. Not only are checks something you need to keep track of but this is where debit and credit cards can become your worst enemy. Five dollars here, Twenty dollars there. Swiping your card can become a bad habit if you aren’t tracking your finances. If you don’t know where your money’s going, you can’t accurately plan to meet your financial goals. Paying attention to cash flow will make you more  mindful of your purchases—and less apt to fork out dollars for yet another pair of shoes.

Check out Mint.com! This is the perfect website to help you track your day-to-day expenditures!

Until next time,

Jessica M.

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