I strongly believe that habits (especially bad ones) are easy to acquire and extremely difficult to get rid of; just ask any smoker or glutton (like me). When I first landed in this marvelous country, I had $300 in my pocket, no credit card and no credit (and no debt of course). Many years later, I have 3 credit cards and $9,500 of debt (not counting the house and the car). My wife and I have decided to change our bad financial habits and acquire healthy ones.
Learn Good Financial Habits
School doesn’t prepare you to be financially literate, unless you happen to specialize in accounting or any financial area; even then, as we have witnessed during these shocking economic times, many so-called experts found themselves in dire financial straits because of their unbridled and unfounded optimism that the economy was going bullish permanently. So why is it that we don’t educate our youngsters in the fine art of financial wisdom? When it comes to our kids and money, would you agree that most young people who go to work and become employees for the first time don’t really know what to do with the money they earn? If you are one of those working adults who suffers from excessive debt and from bad financial decisions, it’s time to quit “cold turkey”.
Destroy Bad Financial Habits
Jean Chatzky, Today’s financial editor, says that it takes 21 days to acquire a new habit. I’ll add that it takes much longer to lose it. She gives us 6 tips to organize our financial life: In my opinion, the most valuable advice and perhaps the most difficult, is to leave your credit cards at home unless you absolutely know that you’ll use one for something indispensable. Removing the temptation also removes the sin: impulse spending. Do you think before you buy? How many times have you bought something at the mall that you wouldn’t have acquired without a credit card? We come up with all kinds of rational explanations: it’s on sale and I’ll never get it at that price again. Psychologists warn that rationalization pushes us to extremely bad decisions because we invent the reasons and we pretend that they are valid (of course they are not). Here’s a statement that’s all too true: we, human beings, like to think that we act rationally and that we make our decisions based on logic. And where does it lead us?
Break Bad Habits When Managing Your Finances
In short, we like to make fools of ourselves to justify our spending on things we don’t really need and which may end up in the closet for secula seculorum. So how can we get rid of bad habits and acquire new healthy ones?
1. Destroy your credits cards. If you know you have the impulse buying syndrome, then get rid of the temptation!
2. Stick to the budget. Learn how to budget your money. On pay day, sit down and write down every monthly expense and put a check mark next to each item every time you have made a payment. There is a lot of personal satisfaction when one finishes paying for something or when one observes the balance getting smaller. Allow yourself 10% of the monthly check as a reward to spend any way you want if you’ve strictly followed the budget.
3. Empty the closet. Have a garage sale for all the stuff you and your kids don’t use any longer. Donate what didn’t sell to a charitable cause if the object is in good condition. You’ll make some money and feel pretty good. Here’s a short guide on how to sell used items and profit from your gently used stuff.
4. Consult a Credit Counselor. “Credit counseling agencies can be a real solution for people who have large financial problems,” says Steve Bucci, author of “The Credit Repair Kit for Dummies.” As Bucci says, sometimes there is no other recourse when problems are huge. He adds that a genuine credit counselor (beware of scam artists) will have more power to negotiate with your creditors than you do. He or she will be able to reduce the monthly payments till you are out of the jam. And here’s something to note: only do business with legitimate credit counseling firms that are affiliated with the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies.
5. Rein in the undisciplined family member. Sit everyone down in the family and talk to them about the financial issues at hand. There may be some people who, despite their attempts at communicating their situation, may meet with some disagreement from their family members. And there may be one or more members of the family — whether husband, wife or teen — who may decide to disrupt the discipline by refusing to abide by any sensible financial rules that one tries to establish. If this happens to you, then you’ll have to be firm, especially with older children. Your son (or daughter) may cause severe financial headaches with his (or her) cell phone. You may have to put your foot down and temporarily take those cost generating items away from him (or her). Exert your parental power if they don’t want to cooperate with you in this regard, especially if you are facing a family financial emergency or hardship.
It’s A New Financial Era
We’ve been accustomed to the idea that credit is abundant and cheap (and patriotic, believe or not). But that irresponsible era is now over! It’s time to go back to the original conservative values of thriftiness and moderation, no matter how difficult and painful it might be to acquire these new habits.