A financial expert reviews the most common toxic money habits and shares tips on how to find a healthier relationship with your finances.
Lifestyle above income
One of the most common toxic money habits is spending more than you earn. According to Rūta Ežerskienė, a member of the board of Citadele bank responsible for retail banking in the Baltic countries, this can be caused by various reasons: failure to prepare a monthly budget, failure to follow it, weak financial discipline.
“We usually spend more because we don’t want to fall behind social trends and maintain a certain lifestyle.” Many people especially started to feel this pressure after the popularization of social networks, where we usually reveal only positive moments of our lives, brag about new purchases or trips, observe the luxurious lifestyle of opinion makers and want to buy their advertised goods”, R. Ežerskienė shares her insights.
In order to solve this problem, she advises, first of all, to create a budget table where you record your income, necessary expenses, and the amount allocated to savings every month. This kind of expense tracking will help you prioritize needs over wants and avoid impulsive or “fashionable” purchases.
The habit of saving is too weak
While we hope for the best in life, we never know what might happen, so it’s important for everyone to have a financial cushion of at least 6 months worth of essential expenses in case of an illness, other unexpected event, career break, etc.
“However, saving is not so easy for many due to a lack of discipline or the mistaken belief that you need a large income to start saving. The most important thing is to “exercise” this habit and set aside a specific part of the monthly budget for savings every month – even if it is a few tens of euros at the beginning: increase the amount for savings when the financial situation improves or in order to save more in a shorter period of time”, advises R. Ežerskienė.
When it comes to saving, a popular rule is the 50/30/20 rule, which states that 50 percent of your budget should be saved. income should be allocated to necessary expenses, 30 percent. – for variables and 20 percent. for savings.
Irresponsible borrowing
This toxic habit is closely related to living above the income level. As the financial expert observes, instead of reviewing their budget and reducing unnecessary expenses, some people choose a quick solution – to use a credit card or take consumer loans and later repay the amount with high interest.
“Consumer loans can be a suitable solution for those who want to make a larger purchase or break down monthly expenses into smaller parts – especially when using special interest-free offers. The problem arises when borrowing becomes a habit to solve your financial problems. Although financial institutions in Lithuania lend responsibly, it is important to critically assess your own ability to repay the loan,” says R. Ežerskienė.
Emotional costs
Shopping brings good emotions to many. Whether it’s a new outfit or a cake, many people use shopping as a way to deal with unwanted emotions: stress, sadness, boredom. Such a habit creates the risk of spending a considerable amount of money on unnecessary expenses per month.
“If you sometimes reward or console yourself with a purchase, nothing bad will happen. However, it is important to consciously monitor your behavior so that such shopping does not become a toxic habit. It is worthwhile to delve into your feelings in order to better recognize the factors that provoke such behavior and find healthier ways to cope with your emotions: talk about them with a specialist, seek the support of friends and relatives, engage in sports or other activities. When you feel the urge to spend, stop and assess whether the purchase is really necessary,” the financial expert shares her advice.
Unemployed savings
According to the Bank of Lithuania, residents currently keep more than 15 billion livres in current accounts of the country’s banks and credit unions. euros, that is, no interest is paid to residents for these funds.
“Although the situation is changing little by little, Lithuanians are still not inclined to invest, that is, to employ their savings and not only to protect them from inflation, but also to earn. In recent years, investment opportunities have been increasing, and everyone can choose the method that best suits their needs. For example, if you don’t want to make a long-term commitment, choose a deposit of a year or even several months with fixed interest. Those who want a higher risk, and at the same time a higher return, can invest in bonds or various stock funds”, Rūta Ežerskienė explains about the investment options.
She notes that the key to overcoming any toxic money habit is willingness to change and discipline. Change won’t happen overnight, but by consistently tracking your spending and following the rules of saving, anyone can achieve some degree of financial stability.
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2024-08-11 23:23:06
