Diana Clement: Kicking the bad financial habits

Borrowing more than you need to pay for luxuries is a habit that will keep you poor for life. Photo / 123RF

Anyone who thinks they don't make mistakes with their money has the biggest bad habit of them all. That is believing they're infallible.

These habits that hold us back can only be overcome if we admit the problem to ourselves and put in place systems and processes to ensure it can't happen again.

Habits are hard to break and you need to replace bad ones with new, good ones.

You can't do this unless you identify the problem first and work out what triggers your behaviour.

Find new ways to approach the old problem and retrain the little voice in your head that tells you otherwise. Be mindful about the new habits until they become second nature.

No budget, no plan

If you don't budget and you don't plan, you will never find spare cash. Winning the lottery or marrying into wealthy are not financial plans.

With the no budget no plan habit there is always another emergency, such as the school fees that you forgot about or the shiny new gadget you've just seen advertised.

Budgeting is simple. Start with what you spend now and look for ways to better organise that money so there is some left over. Create your budget and carve off an amount off on the day you're paid.

Procrastination

I have this one written all over my forehead and I'm not the best example of someone who has kicked the habit once and for all.

But I do have some little mantras that I use when I realise I'm procrastinating. "Do it now" is one that often kick-starts me into action. Having effective To Do lists is another way and like everything in life, there's an app for that - try Todoist.

Fooling yourself

Awful old habits die hard, such as thinking of your credit card limit as free money.

Plenty of people survive with just debit cards. They can still shop online, but don't ever pay interest.

But we need to eat

This seems to be a national disease. No longer do we take a picnic to the beach. We call in at the café and fill up at $20 a head for food and drink.

Mere sustenance from the supermarket, bakery or fruit shop would cost less than $5 a head.

This casual habit of frittering money is one of the main causes for people thinking that New Zealand is expensive.

Keeping up with the Joneses

The neighbours have everything right down to three holidays a year, right? That doesn't mean they can afford it. Many can't. Live your own life and find your own pleasures.

A holiday would be nice too

Borrowing more than you need is becoming common. Loan officers see it every day.

Someone comes in to borrow for a car, some work on the house or to consolidate their debts. "And a holiday would be nice too", the borrower says.

I've seen those exact words on peer-to-peer loan applications. Borrowing more than you need to pay for luxuries is a habit that will keep you poor for life.

Not in KiwiSaver

KiwiSaver is a no brainer. Even the annual tax credit adds up to thousands of dollars more in retirement.

If you're not saving for your future then expect to spend a lot of time at home eating baked beans and watching the box when you retire. Saving for retirement requires a little each week for a lifetime.

Groan-a-little

That's what I do when I see yet another "Help! No Insurance" entry on Givealittle.

Insurance would have replaced the need to put a hand out in many cases. Illness and accidents are something you can cover yourself for.

Use the café money to pay for it so you don't have to go cap in hand to the public.

As well as being an app for everything, there is also a book. Go to the library and find a good one for whatever it is you want to do financially in life. Then read and more importantly, digest it properly.

Top of my wish list to read this year is Dan Ariely's Dollars and Sense: How We Misthink Money and How to Spend Smarter.