We are all guilty of some bad habits. But how much do our habits actually cost us financially?
Whether bad habits cost us money or opportunity, we should examine the real cost of our choices to see if we can even financially afford to have these habits.
Not Being Financially Independent
Relying on someone else financially is dangerous, especially if you’re not married. If you’re a millennial and relying on your parents or boyfriend/girlfriend for financial support, this could be costing you major.
Regardless of how secure you might think you are by relying on someone else’s financial contributions, things always change. Your parents could decide to stop supporting you or you and your significant other could break up. Could you afford to live the same lifestyle on your own?
To become financially independent, you may need to reconsider your career track and find ways to boost your income. Whether you find a full-time job that earns more, ask for a raise at your current job, or start a side hustle, it is possible to increase your overall income.
Smoking
The serious side-effects of smoking aren’t a secret. We all know how dangerous smoking is for our health, but what about our wallet? At an average cost of $5 a pack, a pack-a-day smoker spends nearly $2,000 a year just on cigarettes.
Another cost associated with smoking is less obvious. The harmful effects of smoking causes serious damage to health. Many companies require you to pay higher health insurance premiums and life insurance costs simply for being a smoker, because in the long-run, you are costing them more than a non-smoker for coverage.
Keeping up with the Joneses
Do you feel the need to have the latest and greatest of everything? Do you buy products because your friends and family do? Are you afraid to miss out on whatever your friends are doing?
Keeping up with the Joneses might start off small enough but often escalates to big purchases, like fancy cars, boats, cabins, and designer goods. If you’re putting this all on credit, you are quickly headed towards financial disaster.
Be honest with yourself and others about what you can afford. True friends won’t put the expectation of keeping up on you. If you find yourself surrounded by those who don’t accept where you are financially, maybe it’s time to look for some new, supportive friends.
Tanning
Thankfully, it seems like tanning is finally sliding in popularity. Tanning is not only a huge budget buster, but it causes serious harm as well.
For an average of $10 a visit, tanning is not cheap. If you go an average of 3 times a week, you will spend over $1,500 in a year!
If you must tan, there are plenty of quality self-tanners on the market. Not only are self-tanners more affordable, they are harmless and more convenient as well.
Opting out of your 401k
For simplicity’s sake, say you just put into your 401k and could expect a 6% return. By not contributing a cent more, in 40 years, you would have $1028.57.
Now say you start out with $100, and you contribute $50 each month. Your employer offers to match your contributions, so they contribute $50 as well. At a 6% expected return, you will end up with $186,743 in 40 years.
Even if you have debt, not investing in your 401k is losing interest. And if your employer offers any matching program, you are literally throwing money away. If possible, try to at least invest what your employer will match.
Partying like it’s 1999
Drinking is an expensive hobby in itself. It costs money to buy pregame drinks, a cab ride downtown, cover charges, and overpriced specialty drinks downtown. A night out of heavy partying can cost $50-100 easily. For those who go out twice a week, that amounts to $400-800 a month, or $4,800-9,600 a year!
Partying also has a steep opportunity cost. When you’re lying in bed the next day with a hangover, you’re missing out on the chance to do something productive, whether it’s cleaning the house, doing homework, or working on a side hustle.
Relying on credit cards in an emergency
Credit cards aren’t necessarily bad. In fact, when they’re used correctly, they can actually be a huge financial help. But one thing credit cards should never be used for is to spend money you don’t have.
After disaster strikes, the last thing you want is to be in financial despair. Prepare yourself by building an emergency fund. Even by contributing just a few dollars a month, you’ll insure your financial wellness for the future.
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While no one is perfect, we can all save major money by changing a few of our habits, as well as make better use of our time.
What bad habits have you given up to succeed financially?
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Absolutely true, I am still living with my parents but I’m financial independent since I was 17, yes I had a debt that I paid off and now I’m debt free, luckily I don’t smokle and I don’t drink a lot and also if I’m coffee lover I tend to limit to buy it max twice per week and only if I am not alone….
Living debt free without bad habits sounds like a recipe for success!
These are some pretty straightforward ideas but oh, so true! Especially the one about tanning and smoking – they do absolutely nothing for your body and wallet except damage it, and I’m glad people are slowly becoming more aware of them. For me, the biggest savior in terms of money has probably been to stay away from credit cards and not carry my debit card when I’m out shopping. Limiting the cash I carry with me, makes me think twice before making a purchase, because the opportunity cost of each purchase suddenly becomes really high.
You’re right, tanning and smoking have so many monetary costs as well as health costs to them. Luckily, I never got into either of those! Good point about the opportunity cost of making a purchase. I could buy something on impulse, but using that money is working against saving for something I really need.
I’ve given up making excuses. Given that we live in the 21st Century with a lot of resources, free ones too like finance apps like Personal Capital, blogs, etc. There really isn’t an excuse to not get your financial act together. =)
AGREED! There are so many resources, so a lack of knowledge shouldn’t be an excuse for anyone. Reason and motivation seems to be the hard part for people!
I’ve definitely dealt with some of these in the past, especially my use of credit cards and trying to keep up with the Joneses. They gave a hard lesson, but one I’m thankful for as it taught me the importance of managing my money. I love your addition of tanning to this list. The gym I go to has tanning beds and can never understand why someone would pay that kind of money for something that can ultimately harm their health.
Keeping up with the Joneses is something I think I’ll always struggle with a bit. It can be hard to constantly deny yourself, but I’ve been focusing on only purchasing things I actually want or need versus what others are buying.
The last one is a big one that a lot of people overlook. Credit cards aren’t an alternative to an emergency fund. That’s exactly how I found myself in credit card debt a while back (out of it now thankfully). Spending money I didn’t have because I didn’t save. Great article Rachel.
This may sound counterproductive but I had to give up my roommates. When I bought my home I had to have roommates in order to afford the mortgage.
In the long run this was a great move for me but in the short term I found myself spending money on activities that I normally wouldn’t in order to hang out.
I.E. I don’t care about UFC, Boxing or even the Sunday Ticket. However, I found myself spending money each month on one of these things.
Once my roommates moved out I somehow was able to save more money and pay off my mortgage :)
This was a great article to read! Bad habits are hard to break, but when you finally do it will feel nice to have all that saved money!
Starbucks used to be my bad habit! I was spending $100+ a month on Starbucks. I ended up cutting that down to twice a month max!
It’s sad that smoking is on that list…with all the information about the health consequences, I don’t know why people would continue to smoke! And opting out of a 401k where the employer matches…oh man, please do not turn down FREE MONEY!
I love investing into my 401k. The company that I work for requires me to have worked there a year to be able to take advantage of a matching program, but at least they still offer the plan in my first year of working. I’m saving so much in taxes just by maxing it out, can’t understand why anyone wouldn’t contribute to it!