Consult's Johan Werth shares 10 habits to avoid to become financially free

They say that the definition of insanity is doing the same thing repeatedly while hoping for a different outcome. If you are constantly finding yourself in the same unfavourable financial position, why not change your financial habits? The elections are on the way, loadshedding has become a norm and the economy remains unstable.

?As we get closer to commemorating Freedom Day, Johan Werth CA (SA) CFP? one of our top Financial Advisers at Consult shares with us his 10 habits to rise beyond and become financially free.

?1.?????? Spending more than you make

Spending more than you make is without a doubt the biggest bad habit that you need to overcome in terms of personal finance. Impulse buying is the main contributor to this issue and most people often fall into this trap by taking things on credit, while thinking that they will just pay it off the following month. Instead, more possessions get acquired, the debt increases and before they know it, their expenses outweigh their income.

?2.?????? Keeping up with the Jones’

Peer pressure doesn’t end in high school, and can follow you all the way to adulthood, even in retirement. The constant obsession of wanting to have what others have will often lead you to make unnecessary financial commitments, and will only worsen if the habit is not dealt with. True financial freedom is not being able to buy and own expensive items, but being able to afford them, as well as the upkeep that comes with it. If you can buy it, but can’t afford the upkeep, then you are better off not buying it.

?3.?????? Payday loans

Simply put, a payday loan is a cycle where you take a loan on your payday because you clearly cannot afford whatever it is that you are taking the loan for, with the hopes that you will repay the loan the following month, only for you to fail on paying off the loan with your income, then having to take another loan to pay off the loan. The cycle tends to repeat itself and often people find themselves in more debt than they had initially expected due to the increasing interest rates.

?4.?????? Relying on credit to buy mandatory items

Going overboard with your spendings may lead you to rely on your credit cards to get basic household items. Just because you can pay off a monthly fee on your credit cards doesn’t make it a rational and sustainable routine as the cost of living has skyrocketed and we now find ourselves having to spend more than expected on basic needs. What to spend your credit cards on needs rational planning and often people use credit cards the wrong way and delude themselves with the idea that it’s good debt.

?5.?????? Late payments

Paying your bills late or constantly having to make payment arrangements is a sign that you are living outside of your means. Skipping payments or making late payments affects your credit score and ultimately costs you more money when considering the fines and interests that are added. Set up debit orders and organise your finances so that you will be able to make payments on time.

?6.?????? Not saving for rainy days

One thing that is certain in life is that one day disaster will strike and it is important that you are prepared for that day. Living in a country like ours, you need coverage for almost everything – from looting and vandalism of personal property to the closing down of businesses because of the wavering economy, it is crucial that you have financial protection and security. You are affected by everything that happens in the economy and although you might not see it, you need to make sure that you have enough savings to help you steer through the troubles that come with an everchanging economy.

?7.?????? Living paycheck to paycheck

Just because you can pay off your monthly expenses and you never default on your payments, doesn't mean that you are in a healthy financial position. Having to stretch your finances until the next payday is not a sign of a healthy financial habit and can restrict you from being able to have savings and flexible money. A financial expert can help you break the cycle and reduce your expenses where possible, while looking for opportunities to increase your income. Creating a realistic budget and emergency fund can also contribute to breaking the habit.

8.?????? Avoiding financial education

Ignorance is not bliss when it comes to finance – you will need to be as informed as you can to steer through the uncertainties of the economy. There is more to financial education than just knowing how to budget. From reading financial blogs, books and consulting a professional, being knowledgeable about personal finance will result in rational decision making and will protect you from financial disaster. It is far better to spend your time and money on educating yourself on finances to prevent financial disaster, than to have to spend it on solving it.

?9.?????? Ignoring your debt

Ignoring your debt will lead you to piling more and more debt because you will have no clear perception on how far it has gone as you continue to live a life without financial self-control. Pretending that your debt doesn’t exist doesn’t help and will cause more damage and debt than you initially started with. It’s crucial to know how much you owe, then create a budget with payment plans for each debt. If you owe multiple creditors, pay off your utility bills and fixed bills first, then focus on the smallest accounts later.

?10.?? Never having fun and hoarding money

Saving your money to the point of misery might is not advisable. Occasionally, you need to lighten up and enjoy the fruits of your labour in a responsible way. Not rewarding yourself for the labour that you put in takes the purpose out of the labour itself – it’s important that you take care of yourself. There is no use in having money if you cannot spend it. If your finances are in order and you have money remaining, there is no harm in getting what your heart desires – just be responsible.

As habits develop over time, the same time duration can be expected to unlearn these unhealthy habits to lead you to financial success. A delay in addressing unhealthy habits means that you will have more debt to pay off, as your opportunity to clear up debt becomes slimmer. Free yourself from financial woes today.