Habits are something we cannot change overnight. We pamper ourselves daily despite knowing our limits. While most of us recognize good financial habits, there are still many businesses failing. It is because it takes a lot of effort, time, and resolve to overcome bad financial habits.
Here are bad financial habits that need to be avoided or changed:
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Using Credit as Emergency Fund
The total America’s revolving debt, the sum of the credit card balances accumulated to $1.7115 trillion in August 2019 according to the Federal Reserve. (See the source below) This had become a habit to treat credit cards as free money. It is not money or a debit card that you can use freely to pay expenses, it accumulates interest.
The machine breaks, a vehicle needs repairs, product damage or flood – a rainy-day fund is a lifesaver in these times. But if you don’t have it, you might need to borrow money. This will save your present problem but will create more trouble if it is not paid sooner as it increases the debt because of the interest.
It is not bad to have a credit as long as there is a limit but having a rainy-day fund is more reassuring.
Source: https://www.federalreserve.gov/releases/g19/current/
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Constantly Changing the Financial Plan
It is important to pay attention to news regarding your investments and the business’ industry. But constantly changing financial plan due to a day-to-day report in the industry is as bad as not having a plan. What if it is just a small setback? It can make you miss out on an opportunity. A financial plan is a long-range plan. You need to have a rational reason to change it and not just by impulse.
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Disregarding Cash Flow
Cash is the lifeblood of the business. There should be a proper flow of money. It is not enough that you have money in your bank, there should be “control” by understanding the inflows and outflows because if you run out of money how can the business continue? How can you pay your operating expenses, credit cards and debts?
Changing bad financial habits is not an overnight process. Make a plan and be patient for the result. Financial peace of mind is fulfilling and being financially healthy is a step closer to business success.
If you need assistance with your bookkeeping and tax preparation or guidance for your financial planning, contact us today admin@fas-accountingsolutions.com or 832-437-0385.
