Are you undercutting your efforts to build wealth? Good money habits can help you save and invest for the future. Bad habits can leave you treading water financially. Let's review three bad money habits to avoid.
1. Not saving enough: Instead of paying themselves first, some families pay others first. Dollars they could save and invest are instead spent on consumer goods and services they don't truly need. Money that could be saved and invested for tomorrow is spent today. Are there areas in your life that you could cut costs?
2. Carrying too much debt: Every effort should be made to reduce the size of credit card bills, student loans, and other consumer debt that risk siphoning money away from the pursuit of your long-range financial objectives.
3. Investing too conservatively: Historically, equity investments offer the potential for double-digit returns when the markets perform well. Fixed-income investments are frequently dependent on interest rates; when interest rates are low, the reurns are greater. When interest rates increase, these investments are subject to increased loss of principal. Accepting some risk may give an investor a chance for greater reward.
Are these habits slowing your wealth-building momentum? For an action item, get a good idea of where you stand today and gauge the potential positive impact that can come from paying yourself first and adjusting the way you invest.