5 Habits That Will Inevitably Sabotage Your Finances

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Money is an important part of our lives. We buy what we need with it, we fund our future with it and we support others with it.

Unfortunately, there are a number of bad habits that can sabotage our financial well-being. Some of these habits won't destroy our finances right away, but over time, we may find ourselves in a dire situation with little hope of recovery.

Let's take a look at some of these bad habits and how you can avoid or conquer them as quickly as possible.

1. Smoking. According to the CDC, "Tobacco use remains the single largest preventable cause of death and disease in the United States." Talk about bad for your finances and your health.

Let's pretend for a moment that the only cost from smoking is what hits your wallet -- not your lungs. OK, how much will you be spending?

Let's say that a pack of cigarettes costs you $4.49 -- although the price widely varies from state to state. And, let's say you smoke two packs a day. That's $8.98 a day.

There are 365 days in a year, so that'll cost you about $273.14 a month. That's a lot of money -- especially when you figure that you could have invested that money. Let's say you invest that amount of money every month for 10 years with an 8 percent annual return on your investment. You know what that comes to?

$51,280.92. Yeah, that's serious money.

Another way smoking can hurt your wallet is with life insurance. A client was looking to obtain term life insurance from me and in the process I learned that he was a smoker. While I was shocked to find out I was even more shocked to see how much more life insurance is for smokers. In his case, his life insurance policy was more than three times more expensive than someone that doesn't smoke.

Remember, we're just figuring in the cost of the cigarettes on your wallet. How about the health consequences? The cost of medical procedures and the lost opportunities when you're on chemotherapy are staggering.

Avoid smoking. It's one bad habit that kills more than your financial well-being.

2. Using credit cards irresponsibly. How many credit cards do you have in your wallet right now? Two? Five? Eight?

While it's not necessarily a horrible thing to have credit cards, it is a horrible thing to use them irresponsibly. And, unfortunately, that can be easily done.

Sure, you can earn some pretty nice rewards by using credit cards on a regular basis. But remember, if credit card companies weren't making money by giving away some money, they wouldn't do it. That means that the average guy or gal can't win by using credit cards. The average guy or gal would pay more in interest on their credit cards than they would make through the rewards programs. No good.

Okay, so you think you're above average. That's cool. You're going to need to prove it by following one little tip. What's the tip? I never thought you'd ask ...

Pay off your credit cards every single month.

That's right, before you use your credit cards, you need to make sure that you will be able to afford the bills that come every month. And really, for many people, the only way to do that is to get on a budget and make sure that you have the money before you spend it.

So if you're going to use credit cards, get on a budget and pay off those credit card bills like clockwork. Get in the habit of doing the right thing with your money, not the wrong thing.

3. Eating out during your lunch breaks at work and making other small miscellaneous purchases. It's just too easy to head down the street, swipe your card and get a meal. The problem is that it can end up costing you a lot of money.

Let's say you spend $7.50 a meal four days a week. That could come to about $120 a month or $1,440 a year. That's a lot of money, honey.

Keep in mind that eating out on your lunch breaks alone probably won't kill your finances, but if you add to that getting your morning coffee at your favorite java joint, buying that bagel to go with it and picking up some candy bars after work, now it's starting to look like a bad habit that will inevitably kill your finances.

Of course, this entire article is assuming you don't have a money tree growing in your back yard (if you do, I recommend keeping it out of sight). If you're the average American, living like the average American and making little purchases throughout the day just isn't an option if you want to have a decent retirement and leave some money for your kids when you reach your final destination.

Don't discount this tip. Entire industries thrive by selling low-cost goods. Don't let these little expenses sneak up on you and destroy your financial situation.

There is some "good" news if you're in the habit of making multiple small purchases every day. You know what it is? It's that you probably won't experience a sudden downfall due to your spending behavior. It will happen slowly over time without you realizing it. Perhaps that's not such a good thing after all.

4. Buying a new car every couple of years. Every time I hear of a person buying a new car every couple of years, I almost roll my eyes. There are worse things, but not much is worse than forking over $20,000 every few years.

Driving older cars can save you so much money it can make your head spin. Now, I'm not recommending you drive something from the '50s, '60s or '70s. Hitting your head on a metal steering wheel probably isn't much fun -- just saying. The cars I'm talking about driving are maybe five or 10 years old. These cars have depreciated enough and are safe enough to represent tremendous value in your life -- especially to your finances.

Mechanics will tell you that new cars like hybrids and electric vehicles aren't quite yet cost-efficient. Why? The batteries. When the batteries have to be replaced every few years, you might end up spending more than you'd save by not having to purchase gasoline. So next time you try to convince yourself that you "need" a new car because of the efficiencies involved, make sure to do your math first.

If you haven't noticed, newer cars cost a whole lot more to cover with auto insurance than older cars. Plus, when you have newer cars, you're probably going to be tempted to raise your comprehensive and collision coverage -- and those coverages cost a pretty penny.

Be smart when it comes to vehicles. Your finances will thank you over time.

5. Winging it (financial planning) and hoping for the best. I have clients step into my office all the time to ask how much money they need to save every month for retirement. Do you think I tell them all the same thing? Of course not. How much they need to save depends on their current financial status, what the future holds, and their goals.

For example, I'd want to know how much money they think they could live on in retirement and then I'd need to account for inflation. Then we'd have to look at what they can expect from various investments from now until they retire and beyond. I'd also need to know about any major expenses that they have coming up. The list goes on and on.

True, you can drive yourself crazy accounting for every little data point in the process. But it's certainly worth some exploration. After all, you don't want to retire only to realize five years later you blew it by quitting your job.

That's why I recommend meeting with a financial adviser who can help you create a financial plan. Now, I'm not just talking about investing, you're going to need a professional who will help you look at the big picture.

It's also worth your time to understand how financial advisers get paid. They need to demonstrate their value to you before you sign on the dotted line.

When it comes to financial planning, don't wing it. Hire a professional, educate yourself, and make a plan.

By overcoming these bad financial habits, you'll find yourself enjoying a healthier bank account and more time to do the things you want to do in life. Don't let money rule your life -- you tell it what to do.
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