7 deadly financial sins you should avoid at all costs
It seems that in today’s world, we can be easily distracted by the comforts of short term material wealth and ineffective money management habits. Our financial stability can be compromised at any time and the feeling of uncertainty can sometimes completely take over.
What we can be certain of is that markets will continue to boom and bust, inflation will rise and fall. But we need to realise today is that we do have the power to change and improve our own financial behaviour. As with everything else in life, the wrong behaviour can end up landing us in a difficult position. Temptation can pop up everywhere and the urge to spend now and worry later can be a difficult mindset to overcome. Dining out with friends, family holidays and shopping trips are all wonderful pleasures to indulge in but for many of us, we frequently give in to these financial vices and end up in hot water.
It’s never too late to start investing time and effort towards a successful financial future. So re-evaluate your financial progress and ask yourself this: “are you committing any of the seven deadly financial sins?”
Take a look and see where you might be going wrong and change those habits from the get go!
Lust: following your heart instead of your head
Sometimes when you follow your heart instead of your head when making financial decisions, you may be tempted to overextend yourself. Acting impulsively or emotionally when it comes to your finances, rather than rationally can lead to an empty bank account and a pile of debt. Something to keep in mind when shopping around is: if it looks too good to be true, then it probably is!
Some of the false advertising associated with products could include clothes and appliances claiming to be half price or made of authentic material or perhaps an email congratulating you on inheriting a large fortune. The Australian Competition and Consumer Commission’s Targeting Scams Report revealed that $85 million was reported lost to the ACCC Scamwatch last year with 105,200 scam complaints also submitted. This year, the ACCC’s Scamwatch has already received 1,175 complaints about fake surveys, emails and social media posts. $2600 has been reported lost so far according to the ACCC’S Scams Report.
Keep your eyes peeled for anything that may seem suspicious or possibly too good to be true. Think logically and rationally when faced with a financial decision and follow your instincts instead! Having a budget and sticking to it is key when separating purchases made with your head and those with your heart. Establishing “buying boundaries” will make this financial sin a lot easier to avoid.
Gluttony: overindulging in the goods
New furniture, lavish holidays, fast cars: it can be all too easy to gorge in the luxuries of life and enjoy that interest-free credit. But what most people forget is that the interest-free period does eventually come to an end and that new car can end up costing you a lot more than you originally bargained for.
Tammy Barton, Founder and Director of MyBudget, explains how gluttony is one of the most common sins that is committed as many people want everything now, whether it’s due to a feeling of entitlement, wanting to have what their friends have or just a lack of discipline.
“As a result many people turn to the options of buy now pay later, rent to buy, credit cards, personal loans and payday loans. Once the interest and fees are added to the purchase price, the overall costs can end up to be quite crippling,” Tammy says.
Our gluttonous behaviour continues in the food department too. Not only can we eat a lot but we throw out a lot too! As a nation, we waste four million tonnes of food per year which ends up in landfill, according to OzHarvest. Aussies throw out $8 – $10 billion of food every year, which equates to throwing out one out of every five grocery bags. Each Australian household is then throwing out approximately $1,036 worth of groceries every year according OzHarvest… what a waste!
Australia produces enough food to feed 60 million people and yet we are still wasting our money and food resources. Start to write out a shopping list and finance budget to keep a track of where all your money is going and if what you’re spending is too much. Your bank account will thank you!
Greed: money and greed don’t mix
It may seem a bit obvious that you have to avoid being greedy when it comes to money and managing your finances but we still continue to remain greedy with our cash. One of the first steps to managing your money efficiently and less greedily is to stop taking money out! When withdrawing money out constantly, you can face fees and incur high interest rates. On top of that, you could negatively affect your credit rating. Getting money withdrawn constantly so you can have cash in hand faster, will cost you down the line.
Speaking of credit cards and greed, spending more than you earn is a common sin we have all committed now and again. It’s probably one of the biggest sins that can land us in some serious trouble and debt. According to ASIC’S Money Smart guide, Australians owe $32 billion on credit cards, which averages out to approximately $4,300 per card holder. Adding to the worrying statistic, the average card holder is paying around $700 per year if their interest rate is between 15 and 20% according to ASIC.
So what can we do to reduce debt and greed? Here are a few credit card tips you can follow:
- Whether you owe hundreds or even thousands of dollars, begin to make a conscious effort to stop adding more debt to your credit card.
- Try to pay more than the minimum repayment and maybe set up a direct debit to pay a fixed amount off your credit card for every payday.
- If you have multiple credit cards, pay off the one with the highest interest rate first and then continue to do this for the remainder of your cards.
Getting out of greed and debt can take just a few simple steps if you’re willing to try!
Sloth: the cost of laziness
I’m sure we can all count the number of times when pure laziness has ended up costing us a lot of money. Think about it, when was the last time you weren’t bothered to shop around for the best deal and missed out on saving quite a bit of money? There are so many instances of this type of lazy money management, for example when you buy travel money at the airport instead of trying to sort it out in advance; it’s most likely you won’t be getting the best rate. Or when you’re too lazy to switch to a better deal such as car insurance, home and contents or health. You could end up paying a lot more than is necessary!
In the end, laziness is a sin that will leave a hole in your wallet and will constantly delay your financial decision making. It may seem tedious to set yourself a budget or basic money goals, but getting into the habit of keeping financially conscious will eventually keep your accounts in order. There are so many tools you can use to keep a closer eye on your money and once you begin to pay attention to your daily, weekly and even yearly financial habits, you’ll find room to improve and grow. Your laziness with money will be long forgotten!
Wrath: the knee-jerk reactions to financial problems
It’s an important rule to learn: never let your wrath ruin your savings habit. It’s important not to blame others for your financial misfortunes just because it hasn’t been going your way. It’s time to step up, take control and work your own problems out without involving other people. Losing your head over a bill, loan or investment can cloud your judgements and lead to some detrimental decisions further down the track.
Take a look at the whole picture and rationally decide what your next steps should be and how to respond to people about money effectively without ruining relationships.
Envy: the green-eyed monster of money
“Keeping up with the Joneses” is a mentality that will push your bank account to the brink of debt and bankruptcy. Envying what other people have and are buying will affect all your financial decision-making and could leave you feeling miserable as there will always be someone else who has more. Trying to appear flashy and stylish could mean losing substance in return for looks. Not everything has to be a competition and everyone has different needs to fulfil depending on their lifestyle.
Instead of resenting or being jealous of what other people have, why not start your own path to financial success? This could be the best time to start an investment plan or begin finding ways to make extra money through a new job opportunity, moving houses or changing your lifestyle around. If you find yourself constantly comparing your situation and how much you make and spend with others, it might be time to make some changes either internally (your mindset) or externally (your actions).
Pride: too proud for financial help
The final sin to avoid is being too proud to ask for financial help and thinking you know all the answers to your problems. Seeking financial advice and being open about the financial difficulties you are facing is the first step to correcting your previous monetary mistakes. Being too proud to admit something has happened in the first place will mean being more stressed, alone and in denial about your financial problems.
“Many people feel ashamed about their financial situation – particularly if they have been living beyond their means to appear better off than they are and as a result accumulating a lot of debt,” Tammy explains.
“Honesty is definitely the best policy. People are often surprised at how empathetic family and friends are and how much support they are willing to offer to someone who is honest with them and who wants to improve their situation. Confess your sins, so you can start to move on.”
Asking for help or seeking advice is one the best things to do, especially when you’re anticipating major life changes such as starting a family, buying a house or retiring. Turn to family and friends when you’re feeling out of control or you’re drowning in debt because you will discover there are many ways to seek financial help. When in doubt about your financial position or future, don’t cover up your worries, turn to a loved one. It’s always better to have a helping hand than staying proud.
Putting the work into a budget
“Do the maths: work out what the item will actually end up costing and consider in five years time when you are making your final payment, will it have been worth it,” Tammy explains.
“Saving up for something and paying for it in cash is very rewarding and the feeling of satisfaction you get is good for the soul. Buy some of your big ticket items second hand, work out what you can really afford to spend on household items and stick to that.”
“Putting a budget together is the best way to determine how much you have to spend and how much you can save for future purchases,” Tammy says.