6 second take: Learn how to overcome your worst financial habits before they come back to haunt you.

People don’t set out to have financial difficulties, yet such hardships are commonplace. Many struggle financially — some continuously, some occasionally, but none intentionally.

If we don’t prefer to have financial hardship, then why do we deal with it? What is it, outside of major calamities, that causes so many to suffer financially?

The calamity route to financial hardship is often readily apparent: loss of what appeared to be a very stable job, sudden health problems, accidents …

But the more common scenario of persistent financial struggle often doesn’t have such a readily visible trigger. People are trying to do the best they can, yet some people struggle more than others, despite seemingly identical circumstances.

The difference between success and struggle is often a difference of money habits. We repeat behaviors that aren’t in our best interests. In other words, we have some bad financial habits. Let’s be kind to ourselves and call them “suboptimal.”

It’s not that we’re purposefully harming ourselves. We often make our choices with the best of intentions. But over time, repeating suboptimal behaviors can add up to significant financial hardship. Here are four common financial behaviors that cause harm — and how to overcome these problematic habits.

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1. Lack of Preparation

Lack of preparation is the suboptimal habit of failing to adequately plan for financial contingencies. This means not budgeting, not building or maintaining an emergency fund, and failing to carry appropriate insurance plans.

When we aren’t prepared for what life throws at us, we can get into financial difficulties. If we don’t budget, we may overspend and not have resources to meet an unexpected emergency — not even a small one.

Many people don’t have an emergency fund.

But no one is immune to emergencies. They happen.

They’re unexpected in that we don’t know when they’ll happen or what exactly they’ll be. But we do know that emergencies happen and that they cost money. We can reasonably estimate that we would have most emergencies covered if we held several months’ worth of expenses in reserve.

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Solutions

That may seem impossible. It’s hard to visualize yourself building an emergency fund when you’re struggling to meet day-to-day expenses.

The answer isn’t waiting. The answer is starting. Even if it’s just a couple of dollars, it’s a start. You can overcome the suboptimal financial habit of not preparing enough by starting the habit of systematic savings. Build an emergency fund in a separate account from the rest of your money, such as a savings account strictly for emergencies. Add to it systematically, starting small and increasing it when you can.

Insufficient protection is a part of the suboptimal financial habit of not preparing for the future. If you lack medical insurance, seek out the resources that are available to address this problem. If you have children, you should probably have some life insurance. It doesn’t necessarily need to be a big policy with a lot of features. If term life insurance is all you can afford, that’s fine.

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2. Lack of Attention

The suboptimal habit of not paying attention leads to financial problems when things go unaddressed. Things like bills not being paid on time or payments bounced because you didn’t make a deposit.

It’s amazing how often people incur bank fees when they don’t need to.

This happens because their money is in the wrong account, in their wallet, or somewhere other than where it needs to be.

Solutions

The suboptimal financial habit of not paying attention is best addressed with a two-pronged approach. The first is to automate your finances.

Not everyone finds themselves victims of this habit. Some people like to pay attention to their funds and how they are using them. These people rarely run into lack-of-attention difficulties. Meanwhile, others dread delving into finances.

Both types of people should automate as much as possible. There’s no reason to have a missed or late payment if your deposits and payments happen automatically.

And second, you should have at least a brief weekly financial check-in with yourself. Look at what you have coming due financially and verify that the resources are in place. This is especially important when you have some non-routine expenses. Perhaps there’s a dentist bill or something else that needs to be paid that’s a one-time thing.

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Automating everything you can and having a brief weekly check-in with yourself are good financial habits that can replace the suboptimal one of not paying attention.

3. Procrastination

The suboptimal habit of procrastination is a very common one. Many people are going to start saving for retirement “soon.” As soon as they clean up their outstanding bills — or move, or get a new job, or … something. Sometimes this “soon” goes on for years without ever really getting there. If “soon” is on the horizon for more than a few weeks, there may be some procrastination going on.

For many people, the perfect time to begin saving for the future will never feel like it arrives. You can’t wait. Well, you can. Perhaps you have. But you shouldn’t.

Solutions

Action overcomes procrastination. You don’t need all the answers. You may need a first step. Commit to investing in a retirement plan even if you can’t do as much research as you’d like. Get some trusted advice. Learn by doing.

Your results may not be perfect. Even if you knew everything and had a crystal ball, they still wouldn’t be perfect.

That’s not how finances work. You need to move in the right direction and adjust as you go. The future isn’t completely predictable. You can, however, predict that retiring — or educating your children, or whatever you might be procrastinating on — will get harder the longer you wait.

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4. Justification

The suboptimal habit of justification insidiously eats up your financial future. Justification is the victory of emotion over intellect. It looks like getting a new car with a payment that’s too big because you need to get around or taking out a too-large mortgage because you need that house or financing a vacation through debt because you need to get away.

The financial habit of justification is often seen with the word “need” in front of a large or largeish expense. No one needs a luxury car. No one even needs a gas-guzzling SUV. Sometimes a luxury car or a large SUV is a reasonable purchase. In those cases, you can justify buying the car because it’s easily affordable. In such situations, it’s also clear that it’s not needed.

It’s a reasonable purchase if you know it’s coming out of excess funds. You know that you’re on track for all of your financial goals; you have more than adequate reserves and insurance plans; and you know that it’s extra money that would just accumulate without going to other needs. See — there’s no justification there. There’s no “need.”

Calling a luxury a need means you’re convincing yourself that incurring an excessive expense is a good idea.

The suboptimal financial habit of justification can be a tough one to beat. It requires being honest with yourself. If you may have been guilty of this, consider large purchases by first determining the minimum requirement to meet the real need.

For example, you may need a vehicle for transportation. That may need to be a car. But if you drive a lot, rarely with more than one or two passengers, and don’t need to move bags of hockey equipment through blizzards, you may not “need” an SUV.

There’s nothing wrong with getting an SUV if it’s affordable. But don’t convince yourself that you have to get one when it’s either not affordable of marginally affordable. That’s when there’s a problem with justification.

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Not Living Within Your Means

A subset of this problem is failing to live within your means. It doesn’t need to be just big-ticket items. Some people simply spend more than they have coming in. They justify new clothes and frequent dining out, but fund their lifestyle with debt.

This is often a problem that results from justification. Sometimes it’s the word “deserve” instead of need. Sometimes it’s still framed as need. No matter what linguistic trickery is employed, justification that results in spending on things you can’t afford will destroy your financial future. And you might not have to wait — it could even destroy your financial present!

Solutions

The way to overcome justification is to not allow emotion to rule over intellect. You can do this by examining the thing that you “need” or “deserve” to see what’s really happening. It might also help to put some time in between the reaction and the purchase. The feeling of needing or deserving something will often diminish the next day or a few days down the road.

Final Thoughts on Overcoming Suboptimal Financial Habits

This is by no means an exhaustive list of suboptimal financial habits, though these are some prevalent ones. It’s not always easy to make change, and sometimes we need help to do so. That’s okay. Sometimes it may be help with an issue and we can see a financial adviser or other trusted professional. Or we may be experiencing stress or financial anxiety that necessitates professional help.

In life, we are more defined by how we handle situations than by the situations themselves. Finances follow this pattern: Your outcomes are far more determined by how you handle your finances than any other aspect of your financial situation.

Financial literacy is the solution for financial wellness. We need to be intentional with our finances to optimize our financial well-being. That includes having good financial habits and overcoming suboptimal ones.