Understanding & Conquering the Bad Behavior That Affects Your Financial Wellness

About the author: Lamar Watson, CFP®, is a Fee-Only Financial Advisor in the Washington, D.C., area that works with clients virtually across the country. Dream Financial Planning is a Fiduciary Financial Planning firm specifically designed to help individuals in their 30s and 40s take control of their finances and fulfill their dreams. Feel free to schedule a Free Consultation to learn how we use the DREAM Financial Planning Process ™ to help our clients achieve their goals.

Being financially literate means that you have a good grasp on your finances and have positive financial habits. Maybe you contribute to your retirement savings accounts regularly, keep an emergency savings fund on hand, and work hard to pay down debt because you understand the consequences of accruing interest.

However, there are some common behaviors that may seem small but can significantly impact financial wellness over your lifetime. From avoiding opening a bill to splurging on your night out, most of us are guilty of a few bad financial habits.

Below, we discuss how you can identify your own costly hang-ups and work through them to create a strong foundation of positive financial decision-making now and through retirement.

4 Common Money Mistakes

There are a few common scenarios we tend to fall into time and time again with our money.

Mistake #1: You Play Victim to Your Debt

If you keep telling yourself you’ll never get out of debt, it can make it much harder to overcome. Convincing yourself that the task is impossible likely means you’ll put less effort into trying to do anything about it.

Mistake #2: You Don’t Plan for the Future

The earlier you start saving, the harder your money will work for you in preparing for retirement. It can be tough to think (or care) about retirement in your 20s and 30s but putting a small (but consistent) amount into your retirement savings every month during your early adult years could mean thousands more you’ll have to withdraw in your 60s and 70s.

Mistake #3: You Aren’t Prioritizing Properly

One of the hardest things to do when it comes to improving financial wellness is to strike a balance between your needs and wants of today and the financial security of your future. When you’ve got your own retirement to think about, aging parents and kids headed off to college, how do you know what to spend and where?

Prioritizing your finances properly typically requires the help of a knowledgeable financial advisor who can help you stay focused and organized.

Mistake #4: You Don’t Have a Distribution Strategy

Saving enough for retirement is really only half the battle. The other half? Distributing your retirement income in an effective and tax-efficient way. Heading toward retirement with no distribution strategy in place could create unnecessary tax burdens and financial distress.

Conquering Bad Behaviors

Conquering bad (or unproductive) financial behaviors takes persistence and self-discipline. There’s no quick fix, and you should expect changes to be gradual. Below are a few of our tips for conquering bad behaviors that may be affecting your financial wellness.

Tip #1: Be Mindful With Spending

With online shopping and contactless pay, buying is easier than ever. This, unfortunately, can make it easy to be impulsive and unintentional with your spending. Before a purchase, take a step back and determine whether or not this buy is in line with your greater financial goals.

Tip #2: Don’t Let Financial Paperwork Pile Up

Avoiding a bill or bank statement doesn’t make it go away, but it does increase the chance of incurring late fees and penalty charges. If you haven’t already, organize your statements and other financial paperwork. Work on conquering any anxiety you may have surrounding unpaid bills or bank balances, and remember that ignoring them won’t make them go away.

Tip #3: Create an Emergency Fund

By creating and contributing to a savings account regularly, you can save your future self headaches and financial worries. Remember to boost your emergency savings. In fact, adding to your savings account should be a top priority in your monthly budget.

Tip #4: Make a To-Do List

The truth is, there’s almost always something you could be working on when it comes to boosting your financial wellness. Reviewing insurance coverage, updating your will, outlining future goals, etc.—the list can continue indefinitely. If it feels overwhelming, start writing down everything on your financial to-do list. From there, prioritize tasks that should be taken care of now and make a game plan for those you can work on later down the line. Breaking it down and crossing one thing off your list at a time can help make financial wellness much more manageable.

While it can be difficult to break old financial habits, it’s certainly not impossible. Finding financial wellness is a constant work in progress, but identifying your own areas for improvement and implementing small changes can yield impressive results. It’s important to ask your financial advisor for help as well. Tell them what bad behaviors you’d like to break, and they can help determine the most effective way to do so.

Work With Us

Wealth Management - Combines ongoing financial planning and investment management. The financial planning fee is waived if we manage at least $500,000 in investments for you. Tax Prep will be included.

Ongoing Financial Planning - Our most popular program now includes tax prep. This is a good fit if you have several goals and want the option to manage your investments. We'll cover everything from spending, insurance, taxes, investments, retirement planning, and estate planning, just to name a few. Our goal is to give you and your family an easy-to-understand comprehensive plan to provide you with confidence you're making the right financial decisions.

One-Time Financial Plan With Ongoing Support - An accelerated version of the service above with additional support for one year after your start date. This service requires prepayment for the year and is offered at a significant discount from the annual pricing for ongoing planning.

Three-Hour Ask Me Anything - This is a good fit if you have 2-3 goals you want help with. These three one-hour meetings need to be completed within three months. The fee for this service is $2,000.    

Financial Coaching - Our financial coaching program starts at $99/month. This is ideal for someone who is looking to simplify and automate their finances. We'll also serve as an accountability partner and help you overcome obstacles that may be stopping you from accomplishing your goals. You can learn more about our coaching program here. If you think this program might be a good fit for you, schedule a 15-Minute Demo.

Tax preparation is now part of the ongoing financial planning program. This will be in addition to the Tax Report we already generate for clients and our work with the IRS Withholding Calculator to help prevent our clients from getting a surprise tax bill.

Paying for College

This service is an ideal fit for parents of high school juniors and seniors with a standardized test score (ACT/SAT) and a list of colleges they're considering. This is included as part of ongoing financial planning or as a stand-alone package. This service includes:

• A college affordability assessment
• How Much Colleges Think You Can Afford (EFC) 
• If You Qualify for Need-based Grants
• If You Qualify for Merit-based Scholarships
• Help you search for scholarships
• 1 Year Out of Pocket Cost (For Each College)
• 4 Year Out of Pocket Cost (For Each College)    

I hope we get the opportunity to work together. If you'd like to see if any of these services are a good fit for you, feel free to schedule a free consultation or send me an e-mail.

Get More Personal Finance Tips

Weekly insights delivered directly to your inbox.

Financial Coaching From a CFP® Professional

2023 Important Numbers

What's My 2023 Tax Bracket?

Saving for College and 529 Plans

Mother's Day: Best Financial Tips for Mothers

How Much Do You Need To Make Work Optional?

Keep These Tips In Mind When Reviewing Your Tax Return.