Some people develop poor financial behaviors on their own. Others have bad money habits thrust upon them.
For example, no one gets up each morning saying, “I sure hope I can become the victim of fraud!” However, ruthless scam artists trick millions of seniors into giving out crucial information and then use that information to steal them blind.
It’s also a safe bet that people don’t wake up thinking, “Let this be the day that I completely max out my credit cards and wreck my credit score!” Yet rising food, utility and medical costs leave some folks with no choice but to charge it.
Maybe you were lucky enough to have had good money habits modeled to you as a child or to have developed these good habits as an adult. You might also have been blessed with a good salary and strong retirement savings options. Even so, you might have a few bad money habits that you need to kick.
For a more financially sound future, ditch the following behaviors.
1. Not having a budget
Money experts just love to mention budgets. That’s because budgets work. Just as you wouldn’t set out on a long trip without making a plan for the journey, you shouldn’t live life without making a spending plan.
It’s fairly simple, really: Make a list of all your expenses, then determine how your income meets those needs. This can be fairly eye-opening, especially because some expenses keep going up as you age.
Fortunately, there are ways to get around any potential shortfalls, such as looking for government assistance programs and taking steps to reduce everyday expenses. See “How to Budget For Retirement” for practical information on making your money cover both the necessities and the fun stuff.
2. Giving too much
Everywhere you look, there’s need. Food bank shelves are empty. Shelters are full. Floods, fires, earthquakes and other natural disasters have left homes destroyed and families displaced.
You want to help. But if you help too much, then you might become the one in need. It’s essential to have a plan for giving—a clear understanding of just how much you can afford to share.
Make “charitable donations” a line item in your household budget, but don’t give to just anyone. Before you make a donation to a cause you’re unfamiliar with, check it out through GuideStar.org or CharityNavigator.org. And if it’s a small or relatively new charity? Visit their websites to see if they’ve posted an IRS “990” form. If they’re spending the majority of donations on salaries and expenses, consider sending your dollars to a group that focuses its funds on helping others.
Again, resist the impulse to give more than you can reasonably afford. Help in other ways instead. For example, if you see a buy-one-get-one deal at the supermarket, give the free item to a food bank. Or maybe try:
- Volunteering, if you can
- Donating used items in good condition to charity thrift shops
- Setting aside a small sum each month for spur-of-the-moment giving, such as buying a meal for someone in need
Remember: You can’t help others unless your own finances are solid.
3. Carrying a credit card balance
It can be so tempting to make just the minimum payment. After all, you’re supposed to have fun in retirement – and some months that fun costs more than you can actually afford.
Sometimes we have no choice but to carry a balance. For example, during a medical crisis we don’t always have enough cash to cover things such as healthcare co-pays, taxis to the hospital and any home renovations needed for the sick person.
But if the card balance is due to champagne tastes and a beer budget? Think long and hard about the true cost of your fun. High-interest debt hurts the bottom line.
For example, say you had a $2,000 balance on a 15% APR credit card and you paid only $40 a month against it. By the time you pay off the balance, you’ll wind up paying $1,026 in interest. That’s more than half of what you originally owed.Think what that extra grand could do for your financial security.
If you need help coming up with a plan to pay off what you owe, take advantage of free or low-cost credit counseling from one of the National Foundation for Credit Counseling’s certified financial counselors. Visit NFCC.org to learn more.
[ Read: How to Pay Off Debt in Retirement ]
4. Supporting adult children
As with giving too much to charity, the same is true when it comes to family: Helping others is great, but not when it hurts you.
Inflation, the pandemic and high housing costs have caused some young (and not-so-young) adults either to live with their parents or rely on them to supplement their lifestyles. For example, they might remain on family phone plans, rely on their parents for free child care or ask their parents to co-sign loans.
Most parents would do anything to help their children. However, you need to put your own oxygen mask on first. If providing child care is wearing you out, use your words and say so. If that higher phone bill is putting a hurt on your finances, it’s time to talk with your adult children about researching their own plans. Think long and hard about co-signing because you’ll have to step in if your son or daughter can’t make the payments.
And if you have children or grandchildren living with you? Make sure they contribute at least something to the household budget, such as contributing cash for utilities or taking their turns buying groceries. Or perhaps if they commit to doing housework or yard work, you’ll be able to stop outsourcing those chores.
Don’t subsidize an adult son or daughter indefinitely because you won’t be here indefinitely. They need to find their own way in the world.
5. Ignoring your credit score
Older adults typically have good scores after a lifetime of mortgage, auto and personal loan payments. It’s easy to get complacent, thinking that credit scores don’t matter to folks who already have everything they need.
However, if your score isn’t healthy, you’ll likely pay more for insurance. If you move, you might be asked for a bigger utility down payment. And because “gray divorce” is increasingly common, you might have a harder time buying (or even renting) a place of your own.
You can check your credit score at myFICO.com, or your credit card issuer might provide your score to you for free. To improve your score, The Federal Trade Commission offers resources on how to get (and keep) a good credit score. Pay attention to that three-digit number because it has the power to change your life.
6. Underestimating the cost of celebrations
Every year you allow a certain amount of holiday spending—and every year you’re surprised by the January bills. In addition to going a little overboard with gift-giving, you’re likely forgetting about other holiday-related expenses, such as:
- Inflation’s impact on those Thanksgiving, Hannukah, Christmas or Kwanzaa meals
- The cost of everyday groceries as well, if you’re hosting guests
- The price of tickets to concerts and other holiday events
- Extra gas or tolls when you pick guests up from the airport (or when you lend your visiting kids the car)
- The impulse to pick up the check at a big restaurant gathering
- The jump in utility bills because two or three (or four or more) houseguests are now watching TV and taking showers
This holds true for other special occasions, too. You bought a First Communion present for your great-nephew, then impulsively grabbed the check at brunch afterward. When you learn some high school graduates get money gifts of $200 or more, you add another hundred bucks to your planned $100 gift. Although you carefully researched airline and hotel costs for a relative’s wedding, you forgot about the Lyft or Uber you’d need to get around while in her city.
For this year’s holidays or occasions, be proactive. Look for discounts or group rates for special events. Check last year’s bank and credit card statements to see which extra expenditures popped up, and include them in this year’s celebratory budgets.
And yes, you need to get real. Grabbing the check at dinner is a lovely gesture, but can you truly afford it? Maybe visitors will be fine with renting a car or using a ride-share if you ask. At the very least, they might offer you some money for gas (and you should take it). Your adult kids should be willing to help with cooking (and with the grocery run), rather than sitting around expecting to be fed.
Make the holidays or special occasions a cooperative experience. In a room full of adults, there’s no reason that you have to continue to be the Bank of Mom and Dad. That might sting a little, if you’ve always been the hosts with the most. But your budget will thank you.
7. Impulse shopping
You see the cutest little outfit/teddy bear/cowboy boots, just perfect for your grandbaby, or an aromatherapy package that might help your stressed-out adult child. Or maybe it’s something for yourself or your spouse: fancy chocolates, a new sweater, a weekend package at a swanky hotel.
When you’re tempted to buy something, ask yourself this: What’s the real reason behind this purchase?
Are you bored? Lonely? Anxious to make your loved ones happy, or to make sure they know that you love them? You can’t buy your way out of unresolved emotions.
Don’t shop without a reason—a good reason. Having a “gifts” category in your household budget will let you buy without a care. Go over that budget limit, though, and you risk hurting your long-term financial security.
8. Not cooking enough
It’s easy to make excuses to get out of cooking your own meals. But it’s also expensive to go out to eat or get carry-out frequently. Very expensive. Can you afford it?
Sometimes illness (or taking care of a sick partner) leaves people physically incapable of cooking. In such cases, it’s a good idea to ask family and friends to help or to check out resources such as Meals on Wheels.
For the most part, though, it’s a good idea to prepare at least some of your own food. A slow cooker or a multifunctional pressure cooker such as the Instant Pot can make mealtimes much easier. Pro tip: Cook more than you need, and freeze some single-sized portions. That way, you don’t have to cook as often.
When family or friends ask what you want for your birthday or the holidays, ask them for DoorDash or GrubHub gift cards. They’ll be glad you want something so easy to provide, and you’ll be able to order that Thai food or pizza some of the time.
9. Not protecting your accounts
An army of thieves is after your money. Whether it’s online, by mail, by phone or in person, hackers and scam artists are coming up with devious ways to steal your cash, your identity or even your home. In doing so, they can steal your security and put your financial well-being at risk.
It’s crucial to protect your accounts (or the accounts of vulnerable relatives) with strong passwords, two-factor authentication and anti-virus software. Make sure you observe basic anti-fraud tactics, such as never clicking on links in emails or texts, letting phone calls from unrecognized numbers go to the answering machine or voice mail, and learning how to hang up on scam calls.
Even so, a truly dedicated crook might find a way in. For that reason, consider a tech-based financial safety service such as Carefull. This service offers up-to-the-minute knowledge on the latest scams and security breaches, and provides an additional layer of security with 24/7 monitoring of your financial accounts, credit and identity—plus, up to $1 million in identity theft insurance.
[ Keep Reading: 7 Money Resolutions for 2023 ]