Quit the habits that hurt your finances

“A habit cannot be tossed out the window; it must be coaxed down the stairs a step at a time” — Mark Twain

It is a humongous task to reach a stage of self awareness when you know what your bad habits are. You have to step out of yourself and look at all that you do from a third person’s perspective. It is not easy.

You with yourself become so complacent over the years, that it becomes impossible to see the habits that are pulling you down. And then you keep on doing the same stuff and wonder why things never change for you.

The bigger problem is when we become aware and decide to toss them out of the window all at once.

Remember the ‘crazy ball’ from your childhood? It would bounce back from double the force you drop it with! Bad habits are like crazy balls. You try tossing them out in one day, and they come bouncing back and wreck your world like never before.

Crazy things (and people) are to be handled with care and patience.

You literally will have to show the bad habits your exit door with full courtesy, one step out a time.

When I became aware

I started identifying my bad habits with finance sometime during our stay in Mumbai. The paycheck to paycheck survival is a huge red flag but we tend to ignore it for the longest time because at least we are surviving.

When the paycheck stopped and we had to cut back on our expenses, we fortunately or unfortunately, saw the minimum we could survive on. The minimum grocery, minimum bills, minimum travel, minimum shopping, no credit and no maid or cook.

It took that much for me to realise all the unnecessary expenses we had. I am not saying maid and cook is unnecessary. For me they are my lifelines literally. I hate household work. But that was the extreme stretch that we lived in. Or so I thought. Unless the day came when appliances started shutting down and I realised we did not have the means to repair them.

We really went that far down the road to realise what a mess of bad habits we were living in.

And then, slowly, I started picking one bad habit at a time, taking it one step down at a time and showing it the door before I moved to next one.

– Procrastinating the savings

There was a time when I could have saved Rs 20k a month. But I did not. Then situation changed and I could have still saved 10k a month. But I did not. I had one last thought when I could have taken out 5k a month.

But I kept on delaying it for the times when things would improve. That’s the hope you always have, right? Clearly, that phase of my life was not taking me forward, but I did not know that.

Procrastinating does not help with anything at all! It is only and only detrimental. It is with everything in life, but with finances all the more.

Because money today is worth more than money tomorrow. (It is the gospel truth on which everything money is based. It is known as Time value of money.) And now I am wondering why have I not written about it yet. I will, soon.

And I stopped procrastinating at the lowest. I started saving the minimum I could.

One step at a time.

– Spending beyond your means

This was when I had a job. I applied for credit card. Then we visited the best gym in the vicinity. It was huge, 10,000 sq ft gym with dressings rooms bigger than double my entire house. It was luxurious. Entire TV industry would work out there.

And we enrolled. They ONLY accepted credit card for payments. Rs 5k per head per month.

This was way beyond our means. Not that we could not pay 10k, we could. But at the cost of our savings.

The disaster was bound to happen.

When I realised it, the gym off-course would not cancel the membership because well, that’s how their policies are, so I had to visit the bank and block my credit card.

You have to spend less that you earn to be able to save money. Let’s just say with this membership, we were spending exactly what we earned.

– Getting the order wrong

This is one bad habit that continue to mess with you till you get it right.

There was a time when I would save whatever I was left with at the end of the month, that is if I was left with anything at all. My savings were flexible, expenses were not.

Some months I would save 5k, some months 15k.

And that’s why Budgeting is so important. Your savings come before spending. Always.

– Not tracking small spends

Even after I started budgeting, the one thing I never budgeted for was my Coffee.

I am addicted to coffee. I can’t start my day without coffee. I can’t function after mid-day without coffee. I can’t function after evening without coffee.

And I made the worst coffee one could ever make. (I hate cooking. Even if I cook, people hate eating what I cook. Yes, making coffee is cooking for me)

And so I would order. Cold Coffee.

I did not budget it because, well, how much difference will it make anyway?

Turns out, it was at least Rs 5000 per month! And I don’t drink coffee in “at leasts”.

The smallest spend turned out to be the tip of the iceberg.

Try accounting for your addictions — cigarette, alcohol, sweets, eating out. It may surprise you too.

– Inflating lifestyle with every promotion

This one was profound for me. Before we reached our dungeon like state during our last months in Mumbai, everytime we would get a salary raise, we would think now we can afford more.

Afford more to spend.

And so the weekend spends will increase, because now we are getting Rs 6k extra every month!

And I would buy more books, M would see more movies, we would order out more. We did whatever we could to make sure those extra 6k were spent!

Until we had to cut down everything and live in bare minimum. That’s why I say fortunately or unfortunately.

Immediately after that phase, when we got our salaries again, we just could not spend anything more than the minimum.

We could now clearly see when we were spending on the unnecessary. With the new salary, we now knew that we can afford more.

Afford to save more.

– Not setting small milestones

One thing that intimidates people who begin saving is the huge money that they see their goals will need.

And then one thinks, it anyway looks impossible to reach there. It is better to spend and enjoy today.

We have been there.

Well, I cannot press more on the importance of saving, at least for your retirement. And yes, retirement corpus looks HUGE.

But you have SO MUCH time before you retire too.

Even if you don’t believe in goals, make your own small targets.

I started out by saying to myself, “Let’s save 2 lakh”. Then, “okay, now 3 lakh”.

The good thing is that I and M celebrate small milestones. Literally. We would get 1 pastry or just have cold coffee on every milestone. So the celebration also makes it legit.

And motivates us to target the next milestone.

We move like that and it is much less intimidating.

– Misusing Credit Card

Credit card gives you access to money that you don’t have. And then asks you to pay back only 5–6% of that every month.

It extends credit to you.

And makes it sound like it is good for you.

It is not.

I use credit card now, so I am not going into the good and bad of credit card.

But let’s go back to my 1st credit card, the one I used for that god-like gym we joined.

With no knowledge of how to use credit card, I would end up paying the minimum due every month.

That’s how the credit statement is also designed. To tell you that you have to pay “minimum due” and not “total outstanding”.

That’s because the credit card company earn interest on everything that you don’t pay back.

And you keep on paying minimum due and spending more and more of the money you don’t have.

Spending WAY beyond your means.

Don’t do that. If you use a credit card, pay the “outstanding due” in full. Every month. No exceptions.

– Letting peer pressure control you

Peer pressure not only affects your finances but your relationships too.

When you do things and spend money that you cannot spend, only because the other person is spending what they can.

The peer pressure is self inflicted, I believe. Your friends can never push you to do something if you are open to them about your limits. Your friends don’t intend to be pushy too.

Problem is when we associate shame with our limits. And therefore, we don’t tell them what we can and cannot do.

Don’t spend what you can’t. Learn to say no. And stick to it.

It really is that simple.

How long does it take?

Forever. Because while you are getting rid of one bad habit, you may acquire another.

So let’s not put a timeline to it.

Idea is to focus on identifying the bad habits and then weeding them out, one step at a time.

I have started saving, saving before spending, spending within my means, setting small milestones, tracking small spends, and learning to say no. And it all took time.

Does not happen overnight.

Does not happen all at once.

I still give in to peer pressure once in a while, skip the tracking, overspend etc. But I am not very harsh on myself. I don’t get demotivated. I pick the pieces and start again from next month.

Breaking out of bad habits is a huge task in itself, give yourself some breathing space and keep marching forward.

The benefits will be small, but incremental.

Some quite amazing too.

Like I BELIEVE I make the best cold coffee now.

Originally published at She Talk Cents.

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