Do you have any financial vices? Do you know how much they are impacting you financially?

If you desire to become financially successful, then it is very important that you first become aware of your financial vices and then do your best to course-correct by overcoming and controlling these vices.

In this MoneyTalk, we will talk about financial vices and discuss how to gain control over your spending on these vices.

Let’s first understand what financial vices are.

Financial vices refer to a set of harmful behaviors that people adopt in their financial lives. These behaviors are characterized by excessive spending and can even lead to serious financial problems such as debt and bankruptcy. Financial vices are often the result of impulsivity, greed, or desperation. They can also be caused by a lack of financial knowledge. There typically are different vices associated with different aspects of life. The actual proportion of their presence also differs from person to person. Moreover, something that could be considered a vice by someone, could be considered a virtue by someone else. It falls entirely on individual conscience and morals as per the circumstances to determine what is vice and not. Though some vices are unhealthy, some are still tolerable if done in moderation.

Why should we be aware of financial vices?

We should be aware of financial vices because they can cause immense stress and anxiety and can destroy relationships. Most financial vices are done to “feel better” or “blow off some steam.” And sometimes, these are done due to a lack of attention towards financial actions. Financial vices are habits, and addictions, and the longer they exist, the bigger they get. Financial vices can have devastating consequences. They can ruin your savings and adversely impact your credit score, leaving you with high-interest rates and making it difficult to borrow money in the future.

Now, let’s discuss what are the most common forms of financial vices?

If you’re looking to get your finances in order, it’s important to be aware of the most common financial vices and, if you happen to have one or many of these, you should seriously plan on overcoming these vices.

The 5 most common forms of financial vices which impact your financial lives are:

1. Coffee shop’s coffee

Coffee is one of the most consumed beverages in the world. It’s also one of the most expensive. Per an analysis, the average American spends about $1,100 on coffee each year. That’s more than $3 per day! This $3 per day seems like a small amount, but when added up for 365 days, the amount is pretty high for a simple cup of coffee. And, if you’re spending that much on coffee, it’s time to reconsider whether it is worth buying a cup of coffee every day.

2. Eating out and takeout

It’s so easy to grab a quick lunch or dinner when you’re on the go, but those expenses add up quickly. If you eat out most of the week, you could easily be spending over $1,000 a month on eating out! And these days, ordering food via apps such as GrubHub, Uber Eats, and Doordash, has become very popular. These food delivery companies charge extra fees, which are in addition to the tips you would be giving to the delivery person. Eating out or ordering in, both cause a lot of drain on your wallet.

3. Smoking 

Smoking is one of the most common addictions in the world. It’s also one of the most expensive. This particular vice takes a great toll not just on your health but also on your finances. The average smoker spends about $3,900 a year on cigarettes. Smoking is also one of the leading causes of lung cancer and lung-related diseases, and the hospital and treatment costs would run into tens of thousands of dollars. Not only that, but many health insurance providers also charge a higher insurance premium for people who smoke.

4. Drinking

Drinking can also be expensive, especially if you drink alcohol on a regular basis. An average American spends about $1400 a year on alcohol. While this amount may not sound much, if you also happen to go to bars frequently, combined with the cost of the drinks, the food that you order and the tips that you would give to the bartender, also add to your spending on drinking.

5. Gambling

The average gambler spends about $3700 a year on gambling. Even spending on lottery tickets adds up to a big number over time. While the chances of winning anything are usually low, the greed and hope of winning can turn many folks into addicted gamblers. If you are a fan of basketball, you may have read how Michael Jordan, a very wealthy player, had run into huge debts due to his gambling addiction.

Now that you have an idea of what financial vices are, it is now time to talk about how you can gain control over spending on such financial vices. Here are a few tips to help you take control of your financial vices.

1. Track your spending

This is the first and the most important step in taking control of your finances. You can’t make changes in your spending behavior if you don’t know where your money is going. Start by tracking all your expenses for one month. At the end of the month, take a close look at where your money went and pay close attention to how much you ended up spending on your vices. Calculate how much you had spent on coffee, smoking, drinking, gambling and eating out. Once you see these numbers, do the math of how much you are spending over the year. Tracking your spending will make you aware of how much your vices are costing you and this knowledge will likely trigger a resolve inside you to become better with your spending on these vices.  

2. Understand your spending triggers

You are always going to feel that drinking coffee in Starbucks is the daily routine that you can never change, or smoking and drinking are requirements for you because your body just can’t live without the hit from nicotine or from a drop of alcohol. And your hands may always itch to go and gamble in the hopes of hitting the jackpot and becoming rich in an instant. However, have you ever considered your spending on these vices may have been triggered by negative emotions like anxiety, boredom, depression, or addiction? If this is the case, it’s time to take a step back and reassess your relationship with money. Understanding why you can’t break these habits will lead you to exercise control over your spending whenever your mind wants to spend money on any of your vices.

 

3. Set short-term financial goals

The first and most crucial step in overcoming your financial vices is to set personal financial goals. Initially, these goals should be short-term and realistic. For example, if you are currently spending $100 a week on lottery tickets, your goal could be to reduce this amount by $20 over the next two weeks. If you can make this work for two weeks, you can certainly stick with this behavior over the long term. Similarly, you can set a goal of spending less than $25 on eating out or takeouts this week. If you can stick to this goal, you will certainly gain the confidence in repeating this good financial behavior over a longer period.

 

4. Plan for some occasional indulgence

Making small, regular purchases that make you happy can help stave off the urge to create larger, more impulsive buys. Permitting yourself to spend a set amount of money each week on your financial vices is perfectly fine. It is important that you create a budget for these vices and then stick to your budget and don’t let your weekly “treat” turn into an expensive habit. As an example, consider drinking coffee at a coffee shop only twice a week instead of drinking every day. Similarly, you can gradually decrease the number of times you are eating out or smoking, and thus save money on your financial vices.

 

Let’s summarize what we talked about in this MoneyTalk –

Financial vices are expensive and spending on them can quickly add up and become a major financial burden, from overspending to racking up debts. Many times, we consider these financial vices as essential and necessary things in life. But you need to understand that these are vices that are causing a drain on your finances and are slowing you down from achieving your financial goals. Getting rid of these vices or at least gaining control over them will be crucial for you to be successful in your financial journey.

Note that even if you can save $200 per month by controlling your spending on your vices, these savings would add up to $2,400 in a year and about $24,000 in savings in 10 years.

And the best part is, if you were to invest these monthly savings in the stock market, over the 10 years, you would most likely be having way more than this $24k in savings.