Bad habits are killing you financially.
There are two times of year that naturally have me reflecting on my personal choices and assessing changes I want to make moving forward: New Year and back to school. So, yep, it's that time. Just like our personal health is an accumulation of our habits and choices, so is our financial health. Whether in our personal lives or professional endeavors, certain money habits can slowly erode our financial well-being over time. This month, we will explore damaging money habits that affect both our personal and professional lives, and talk about ways to set healthier money habits moving forward. Here are a few things we will cover:
Impulsive Spending: Whether personally or in our business, Impulse buying without considering the long-term impact on our finances can drain our resources and derail our financial goals. In your business this can mean hiring a consultant that you can’t afford or doesn’t really fit your needs or making a big purchase without really assessing the long-term ROI. This goes hand in hand with the next point.
Spending Beyond Your Means: Constantly spending more than we earn will drain our savings and add debt and financial stress that will weigh on you. Also, relying on high interest credit cards to fund your lifestyle or business can lead to a never-ending debt cycle. Reviewing your personal and business financials regularly can help keep this in check.
Failing to Save: Neglecting to save for emergencies, retirement, or future goals can leave us vulnerable and unprepared for unexpected expenses. Set a minimum monthly amount that goes into savings on both the personal and professional sides.
Ignoring the Data: For many of us finances are a very emotionally driven topic, but if we can get to the raw data and numbers, we can start to make good choices. This means tracking your finances, both personal and professional, creating and reading reports to understand your past spending and then creating and sticking to a budget that will help you moving forward to get where you want to go. If you aren’t looking at the actual data and making decisions only on your “gut” you are putting yourself at a disadvantage.
Not Knowing your Worth: Pricing your products or services too low can undermine a business's profitability and make it difficult to sustain. Also, making your personal pay last priority or not paying yourself a reasonable amount from your business can make you resentful and unmotivated.
Not Using Your Team: We talked earlier this year about building a team around you to help you be a better business owner. If you aren’t using the right professionals, resources and friends to make you better, then you are just going to be spinning your wheels. Living in an echo chamber of your own bad decisions won’t help you move forward. Check out this week’s Podcast interview with Janna Lundquist for a great discussion about this.
We will also talk about strategies to break your bad habits and end 2023 in a better spot.
Awareness and Education: Acknowledging the damaging habits is the first step. Educating yourself about your personal and professional finances and seeking out professional advice will get you moving in the right direction. Get the data you need to make good decisions and use it!
Setting Clear Goals: First you have to know where you are, then you can define your financial goals and develop a plan to achieve them. Whether it's saving for a vacation or growing your business, having a roadmap is crucial.
Budgeting: This holds true for your personal life and your business. After you have the data and the goals, create a realistic budget that aligns with your goals. Track your expenses and adjust your budget as necessary. Review things monthly or quarterly to make sure you are staying on track.
Emergency Funds: Prioritize building both a personal and a business emergency fund to handle unexpected expenses or setbacks. Start with a manageable amount like $100 per month.
Invest in (or set yourself up for) Self-Control: Freeze your credit cards in a block of ice. Find a meditation or activity that helps ground you when you want to emotionally spend. Have a friend, mentor or partner you can call when you need advice and who will check in our your goals and progress. Practice delayed gratification and avoid impulsive purchases. Avoid jumping into every opportunity without careful consideration.
As you look at your own money habits and cringe, know that you aren’t alone. All of us here at Missoula Bookkeeper have our own challenges that we are working through and we talk with clients and friends everyday in the same boat. Let’s spend time this month getting into a better place financially so we can achieve greater financial stability and in turn, less stress and anxiety. Here’s to ending 2023 on a high note!
“Your net worth to the world is usually determined by what remains after your bad habits are subtracted from your good ones.”
