7 Bad Money Habits to Break in 2013 ...

If your finances are less-than-perfect, you might resolve to break a few bad money habits this year. Resolutions are common after the new year, but where do you start? Personal finance education isn’t taught in high school. But despite your lack of education in this subject, you can learn good financial moves and stop bad money habits.

1. Carrying a Credit Card Balance

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I didn’t learn the impact a high credit card balance has on credit scores until my adult years, and many other adults share my experience. If you want to break your bad money habits, start with your credit cards. Credit card balances make up 30% of your credit score. If you shop until your cards are maxed out or near their limits, you’ll significantly reduce your credit rating. This can trigger credit rejections and higher interest rates on loans.

2. Forgetting to Budget

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Going about your month without a financial plan is a recipe for disaster. You might swipe your credit or debit card endlessly and spend cash frivolously. In the end, there is very little money for major expenditures. Keep an eye on how you spend your money and determine at the beginning of each week and month how much you’ll allocate to various expenses.

3. Ignoring Your Emergency Savings

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If you don’t have an emergency savings, make 2013 the year that you start one. Saving your money can prepare you for emergency expenses, such as a car repair, medical bills or other unexpected costs. And with more cash in the bank, you’re less likely to pull out your credit cards. This results in fewer debts. Make adjustments in your spending and set aside 10% of your pay each month.

4. Inadequate Medical Coverage

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There is no need to explain the importance of health insurance. But if you have inadequate coverage, this can be just as expensive as no coverage. Review your current health plan to see if it meets your current needs. Choosing a plan with a high deductible, skipping maternity coverage or declining dental can increase your out-of-pocket medical expense.

5. Splurging on Things That You Don’t Need

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An unexpected purchase now and then isn’t a big deal. But if you make an unplanned purchase each time you step foot in a store, it’s time to break this habit. Small purchases are no exception. These expenses can add up quickly, wherein you may have little cash for other expenses. Buy only what you need and plan out your purchases.

6. Ignoring Your Credit Report

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The contents of your personal credit report determine loan approvals, as well as interest rates on loans and credit cards. It only takes one mistake on your report to justify a higher finance fee, which can significantly increase monthly payments on an auto loan or mortgage - that’s if you even qualify. Order your credit reports each year from the bureaus or AnnualCreditReport.com. Check your reports for accuracy and dispute any errors.

7. Lending Money to Family or Friends

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Lending a helping hand is commendable. But if you’re constantly going into your pocket to help others, this can have an impact on your own finances. Be cautious when lending money to others, and only lend what you can afford to lose. To protect yourself, draw up a loan agreement.

Each day is a new day to improve your personal finances. And if you fall into old habits, don’t beat yourself up. View this as a temporary setback and then get back on track. So, what are your bad money habits? How do you plan to improve your finances in 2013?

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