10 Examples of Poor Money Management (& What You Can Do About It)

There are many challenges you have to face when it comes to money management. If you're struggling to manage your finances, we’ve listed 10 examples of bad financial habits that you probably have and why you should totally get rid of it. 

We’ve all experienced it in our lives. You look at your bank account and see that you still have some debt left from last year’s Christmas. It’s August, and yet you’re still trying to clear all of it. Just how did you get here?

Poor money management is pretty common everywhere you turn, despite being told over and over again on how to better take care of our finances. Sometimes, we all need a gentle reminder in our lives… so here’s 10 examples of poor money management and what you can do to remedy this:

10 examples of bad money management… and what you can do about it

1. Missing your bill payment due dates

Did you know that just by missing your bill payment due dates, you can actually get severely penalised? And it’s not just late fees - you can get penalised in the form of your credit score.

Paying your bills late can cause your credit score to tank, as credit scoring agencies - CTOS for example - factors in just how well of a borrower you are. It’s always good practice to pay your dues - water, electricity, phone, internet, and more - whenever the bill arrives.

Now, if you get your bills late, you may think that you can dispute that with the issuer. However, don’t keep your hopes up - just because it gets lost in the mail doesn’t mean that you can appeal for a penalty review. Always be proactive by searching out your bills and ensuring that they reach you on time.

Read also: What Happens If You Make Late Credit Card Payments

2. Not comparing before you commit to something

If you come across a good deal, it wouldn’t be a bad idea to compare with other sellers if they have something better. To add to that, you should also compare to see if there’s a better product or option somewhere else.

Likewise, when it comes to your personal finance, you should also always compare before you commit. Be it a new credit card, a personal loan, travel insurance, motor insurance, fixed deposits, or anything under the sun, it’s really important that you compare each company’s offerings and terms and see which is right for you and your requirements.

3. Not saving money… not even a little bit

You don’t need to save in the hundreds or thousands, if you’re saving even as little as RM10 a month, it’s still a considerably good habit to practice.

When it comes to saving money, it wouldn't be a bad idea to have several goals. Have one for your emergency fund, another for your retirement, one for your children, and maybe a fun one as a treat for yourself.

It’s good to have a habit of saving, no matter how little, because it gets you in the mindset of preparing the unexpected.

Did you know?According to a 2019 survey on Statista, 32% of Malaysian millennials save less than 20% of their income.

4. Only saving, and not investing wisely

On our previous note about saving money, it’s also important that you consider investing your money too. Growing your money is important in helping you get extra mileage from your pot.

But to avoid poor financial management, it would be a good idea to first learn about the six questions you need to ask yourself before investing. There are also many ways you can invest your money, even in this current COVID-19 climate. We’ve previously spoken to experts with regards to investing in this pandemic - properties, cryptocurrencies, Islamic financing, general investments (and more to come!) - click on these links to learn more.

5. Not keeping a budget

Ugh, budgeting. It sounds boring, but it’s actually very necessary.

It’s important to keep track of your expenses so that you can control how much you earn and how much you spend. While you may think that your commitments (e.g. rent, hire purchase, bills) are only a small fraction of your salary, you’ll be surprised at just how easy it is to lose track of your spending.

6. Spending more than you can afford

They say money doesn’t buy you happiness, but we all know that it… kinda does. Those new Air Jordans cost a bit of money, but if you’ve dreamed of having it for the longest time, you know you’re gonna be really happy with them on your feet.

While it’s always a good idea to live your best life, it’s also important to prioritise what you actually need to instead of what you want. Being discriminate with your spending is a way of living your best life and avoiding poor financial management - incurring losses or accumulating debt over your desires will only leave you struggling to pay your bills.

Read also: 10 Ingenious Money Tips From Malaysian Dads

7. Borrowing money for questionable reasons

We all need some financing help once in a while. Most of us will resort to taking up loans to pay for our cars, houses, education, business… the list goes on. But if you’re taking up a personal loan to pay for stuff like a vacation, new furniture, a wedding, or even gambling, you may want to think twice.

Loans come with a monthly interest rate, which will mean that you will eventually have to pay for more than you initially borrowed. It’s best to save up for these expected spendings and only resort to using loans when you truly cannot afford to finance something large and necessary.

8. Pretending that debt doesn’t exist

If you have debt, it’s important that you always be on-the-ball by checking what you currently owe the bank. It’s tempting to close one eye and pretend they don’t exist - maybe you get anxiety when you see the figure - but it’s actually the worst habit that any borrower can ever develop.

9. Only paying the minimum

If you are using a credit card, you should always pay your owing in full. Paying just the minimum will help you avoid the late fee, but it will eventually bite you back in the back when you start getting charged an interest fee.

Credit card interest rates are notoriously high, and it will take you a very short time to double and even triple your debt if you don’t take any action. Not only is that because of a compounded rate, but because you will also get penalised with a higher interest rate (up to 18%) if you don’t repay your debt.

10. Never checking your credit report

Wait. How does this fall under money management? Well, granted they’re almost two separate things, but poor money management will eventually lead to a poor credit score. And when you have a poor credit score, you will not be able to get financing help for emergencies that may come your way. This may eventually lead you to a dangerous path as the only ones who may be able to help you are illegal money lenders.

Read also: The Ultimate Guide to Credit Scores