In Ghana especially, we have all had to tighten our belts, but also most Ghanaians exhibited very bad money habits which must be nipped in the bud before we enter the new year.

Habits are the regular tendencies we have that are hard to break. Our habits mostly shape our lives – both for the good and the bad.

As 2020 come to a close, Pulse Ghana takes a look at some bad money habits most Ghanaians must not take into 2021.

When it comes to bad habits surrounding money, the effects can be painful: You might, for instance, block the path to realizing dreams like owning a house or retiring.

Here are seven bad money habits and the steps you can follow to break them.

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Spending more than you earn

Spending more than you earn is the cardinal sin of personal finance. This one habit will have a trickle-down effect, causing big problems in all areas of your personal finances.

Its clear most Ghanaians have spent their way into debt in the year 2020.

For instance, if you spend more than you earn you’ll have to rely on credit/loan to cover the rest. The credit comes with interest and traps you into debt.

So, if you currently spend more than you earn this needs to be the very first thing you address. You need to live within your means. Just cut your spending and budget better and you will surely be fine.

Relying on loans to pay your bills

Unless you are taking a loan facility for a property like a house, I will advise you not to. Loans in Ghana come with a very high-interest rate.

While it’s true that at some point you might need to rely on debt – say, for a mortgage, education expenses, or an investment property – it should be done with extreme care and planning.

If you’re using credit/loan to cover basic things like food or rent or are using it for mindless purchases (like a vacation, iPhones or new clothes) you need to remedy the situation.

Using shopping as entertainment

Maybe you one of those Ghanaians who doing compulsive shopping as a way of entertainment, especially during the peak of the coronavirus pandemic in Ghana, when the lockdown was in place.

Spending creates a high that’s addictive, severely damaging your budget and the financial security of your family.

A way to avoid shopping as entertainment is to try a spending fast.

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Living without an emergency fund

If you don’t have an emergency fund, your life is a high-wire act with no safety net. Emergencies are inevitable. Life is full of them.

To build a better money habit, make a commitment to change. Write down your pledge and put it where you’ll see it. This will allow it to reinforce your resolve.

Commit and watch your savings build. If necessary, take on another job to supplement your income to enable you to earn more.

Failing to fund a retirement plan

In our part of the world where people's incomes are generally low, there are compelling excuses for putting off saving for retirement. But none of those excuses will matter if you reach retirement age with little saved.

And, if you don’t take advantage of your employer’s matching contributions to a retirement plan, you’re passing up free money every month.

To ensure a better money habit, start paying close attention to your retirement savings. If you can’t significantly increase the monthly contribution you make to your plan immediately, increase it by 1% a month. Once a year, check the performance of your investments and rebalance your portfolio.

Last minute is costly

Most people have the habit of last minute purchase. Planning ahead can save you money. For example, plane tickets get more expensive the closer you get to departure, so book well in advance. Check out cheaper screening times at your local cinema or work out whether it’s worth joining a loyalty programme with the various supermarkets, malls, filling stations, etc.

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Don’t rush into making a big purchase

If you plan to spend more than GHC 1000 on any one item, make yourself wait for 24 hours from the moment you fall in love with it to the moment you buy it.

This allows you time to think about it and makes sure you don’t just buy the first thing that looks okay while you rest your tired feet. If you still want the item the next day, then go and get it.