4 Myths About Credit Cards That Should Be Retired

Until recently, it could be expensive and confusing for the average consumer to access their credit scores and reports. A side effect of this was a proliferation of rumors about the best way to manage credit. Like any good urban legend, it’s hard to know exactly where these got started. Since Credit Karma launched in 2008 we’ve heard a lot of them and have done our best to put them to rest.

One way that these myths can have an everyday impact on consumers is by influencing how they manage credit cards, the most common form of consumer debt. There are four major credit card myths that come up a lot and need to be retired, mistaken beliefs that can have the opposite effect on a credit score than some consumers imagine.

Carrying a balance helps your credit score

One of the most persistent myths about credit scoring is that it helps your score to carry a balance. The truth is you don’t need to pay a single penny of interest to have a great score. What’s worse, carrying a balance could actually be hurting your score. It is generally advisable to keep your credit card utilization rate (the amount of your credit limit you’re actually using) under 30 percent. Looking at data from Credit Karma members that pulled their credit profile in 2014, we can see that members with a utilization rate between 1 and 10 percent had the highest average credit scores – with scores falling away from the closer you get to 100 percent. Lenders want to see that you can use credit wisely, but if you’re using too much of your balance you’re seen as a higher risk. Using your credit cards each month and paying them off will show your creditworthiness and could help your scores.

Missing one payment isn’t a big deal

One of the easiest ways to potentially hurt your credit score is to make a late payment. Being more than 30 days late on just one payment can hurt your score significantly and late payments can linger on your credit report for over seven years. Your credit score is designed to be an indication to future lenders about how likely you are to repay debts in a timely manner, and your on-time payment percentage is an important factor in working that out. Try and develop a system that works for you, to put yourself in the best position possible to not miss a payment. Set up calendar reminders, enroll in auto bill pay, or take time to clear outstanding bills on payday. It’s not just your score that could get hit when you miss a payment, some cards also add on late fees and penalty APRs.

You should close cards you’re not using

If a card charges an annual fee, you might be better off closing it. But if there’s no immediate benefit to shutting it down, it could be in your best interest to keep it open. For a start, having more accounts open means a higher overall credit limit – assuming the temptation doesn’t result in you charging more to your cards – and could result in a lower credit card utilization rate, which credit scoring models take into close consideration. If you close an account but don’t curtail your spending, your credit utilization rate will go up and your score could fall. Closing a card can also lower the average age of your accounts. It generally isn’t as influential a factor on your score as utilization rates, but some credit scoring models only look at open and active accounts when calculating the average age of accounts and subsequently your score can take a hit, especially if you close a card that is significantly older than others.

Being an authorized user on somebody’s credit card has no impact on you

Becoming an authorized user on someone else’s credit card is a double-edged sword. You’re generally not legally responsible for the debt associated, but your credit score can be affected for better or worse since credit bureaus typically treat these credit cards as if they were your own. These cards can add years of positive credit to your report, but on the flip side, if the primary account holder misses a payment, you can miss a payment. If they have a high credit card utilization rate, you might as well. For many people, being an authorized user on someone’s account is seen as a pathway to building credit, but in the wrong situation, it can have the exact opposite result.

Source:https://blog.creditkarma.com/credit-cards/4-myths-about-credit-cards-that-should-be-retired/

How to Put More Money in Your Savings Account

Savings Account

For so many people who are dealing with debt, having a savings account may seem like an unrealistic goal. Regardless of your income and what your current financial situation is, having a savings account is vital for your financial health. If you think having a savings account is out of your reach or you are looking for simple ways to make that amount grow, here are some helpful, simple ways to increase the balance of your savings account.

How to Put More Money in Your Savings Account

1. Open a separate savings account.
   If you haven’t done so already, open a separate account for your savings. If you are trying to save money in the same account you write checks, use your debit cards, and pay for bills and living costs, it is easier to start to dip into your savings. If you open a separate account, you have a clear picture of how much you have saved.
2. Pay yourself every month.
   When you sit down to pay your student loan, credit cards, rent, and other bills each month, pay yourself by making a deposit into your savings account. Making it a habit will make it easier to increase the amount you have saved, even if it is a small amount.
3. Add savings to your budget.
   While you are creating your new budget, add savings to the list as well. Just as you factor in costs for food and entertainment, you can factor in an amount for savings each month. Make the budget balance by trimming money from your other flexible areas, like entertainment or buying gifts.
4. Create savings goals.
   It may inspire you to save more if you have goals and aspirations for your money. If you are married or have a joint account with a partner, talk about your goals with them. Outline your goals and the timeline for these goals. And of course, discuss your steps to achieve this goal. If you aren’t on the same page as your spouse, read 5 Ways to Save Money When Your Spouse is a Spender.
5. Continue “paying” completed bills.
   When you are done completely paying off a bill, such as a credit card balance or doctor bill, continue to “pay” that same amount to your savings account. You were already used to paying this balance each month, so you should be able to part with this money easily.
6. Take advantage of employee savings programs.
   If your employer offers a match in your 401K, take advantage of this fantastic program. It is saving your money plus a bonus.
7. Consider a linked debit and savings account.
   There are bank accounts that round up each purchase you make on your debit card, and then deposit that money towards your savings. For example, you might pay for a dinner that is $40.05. Instead, you would be charged $41. That 95 cents are then directly deposited to your savings account. It may not seem like much but think about each purchase you make and you’ll realize that the amount can really add up quickly.
8. Automatically save from your check.
   Some employers offer to directly deposit a portion of your paycheck into a savings account instead of putting it into your checking account. While you can do this yourself, if they offer it, it might be a good idea to sign up so you don’t even have to think about it or get tempted to spend it instead.
9. Increase your income.
   Sometimes after paying bills every month and living expenses, there is simply nothing left. If that is the case, increase your income. There are many ways to do this. If you already have a full-time job, consider if you can ask for a raise or take on extra hours. Get a part-time job. Take on side jobs like doing housework, landscaping, babysitting, tutoring, giving a music lesson, walking a neighbor’s dog, or any other small way you can increase your income. With your extra income, you can then put this towards your savings account.
10. Cut expenses.
    A quick way to increase your savings account is to cut your expenses every month. First, go through your bills you pay every month. Can you cancel your cable? If not, consider bumping down to a smaller package with fewer channels. Call your cell phone company to ask if there is a smaller, less costly phone plan. Take on a roommate to split rent and bills. Cut back on your electricity. Use what you have instead of buying new clothes or other items. Cook at home and eat leftovers instead of heading out to restaurants. Find free and cheap activities to do with your family and friends instead of paying for expensive things to do. Try to walk and bike whenever possible to save money on gas. Go through your credit card and bank statements from the last several months. Highlight the items that were “wants” that you can do without. Now try to avoid these types of purchases. Take the money you saved, and put it in your savings account.
11. Put any unexpected money into the savings account.
    Whether it is a birthday or holiday present, a tax refund, a bonus from work, a credit, rebate, or any other type of money you weren’t expecting, put it into your savings account. Some credit cards offer cash back rewards where you earn money for charging. If you are enrolled in this, when you get the cashback, put it right in the savings account.
12. Stop making excuses and putting it off.
    Many young people don’t think they need to worry about saving quite yet, and sometimes older people feel like it is too late. People feel like they don’t make enough money to save or they really don’t need to save because they will always have the opportunity to work and earn more money. Whatever your excuse is for not having a savings account and not saving money, stop using it. Saving money is hard, and it could be overwhelming because it forces you to take an honest look at your finances, but it is important.

How have you increased your savings account? If you haven’t yet, which of these ways would you like to try?

Source: http://www.mydollarplan.com/how-to-put-more-money-in-your-savings-account/#ixzz3nCnwwyif

Your KPI for personal financial success: Net worth

Financial Success

HOW does one measure personal financial success?

Some think it is to do with the balance in your bank account while others use their salary as a guideline.

If you’re one to keep up with the Forbes list of top wealthiest, however, you’ll see that the measure of financial success is neither of these two values.

For example, topping the list is none other than Bill Gates with his net worth valued at a whopping US$79.2bil. Locally, sugar, palm oil, and real estate tycoon Robert Kuok take the spot with his net worth commendably valued at US$9.1bil.

In my previous article, I have outlined how investing with a net worth in mind is far more efficient as compared to only managing your investments with return on investment (ROI) in mind. ROI is in fact merely a single factor of several which affects the end result – your net worth.

What is net worth and why is it important?

Net worth is essentially a monetary value from which is derived after totalling up your total assets – such as the value in all your bank accounts, shares investments, unit trust investment, the current value of your properties, EPF, and so on – and then subtracting the total value of all your outstanding debts such bank loans and taxes.

While net worth is used to gauge your current financial standing, it also serves as an excellent key performance indicator for investing. It quantifies each good and bad financial decision you make thus rendering it one of the best measures of one’s personal wealth. How does this work?

Let’s say you decide to pay more than your monthly mortgage repayment to settle your loan sooner. While you think your wealth has shrunk due to the fact that you have less cash to your name, in the long run, you benefit from lower interest charges, therefore increasing your net worth.

For medium to long-term investments, it makes better sense to take a little risk and invest in a few blue-chip stocks than to take the risk-averse path by keeping any surplus cash in a bank account. The quality and payoff of the decision to invest in blue-chip stocks would be reflected in the growth of your net worth some five to eight years from now.

Having a positive net worth also provides you with financial security.

Let’s say, for some reason tomorrow you lose your job. A person with large savings and zero debt (high net worth) would have a more worry-free time in between jobs, as compared to the next person who had a high paying salary but zero in savings and a large amount of debt (negative net worth).

Similarly, a person with a high net worth has the freedom to pursue his or her life’s dreams and ambition even at the expense of drawing a low starting salary. On reflection, a person with a negative net worth will not have the luxury and freedom to do as such.

From this scenario, you can already see the different dynamics net worth provides as compared to the mere value of your take-home pay or the amount in your bank account.

How does one increase net worth?

To increase your net worth, you’ll need to shift your attention to these four drivers:

The four drivers of net worth growth are savings, ROI, risks, and costs. All these factors work in tandem to influence your net worth as a whole.

To increase your net worth, you’ll need to:

Increase your savings

Savings is the raw material needed for your net worth growth.

To increase your net worth exponentially, you need to invest. And to invest, you’ll need to have capital. Thus the more you save, the more investment capital you have at your disposal.

The good news is that, among all the drivers for net worth, savings is within your control. The amount you end up saving annually is entirely dependent on your discipline and saving habits.

For example, you would have accumulated RM549,143.57 at the end of 20 years if you have saved RM12,000 annually with an 8% return. For additional RM48,000 savings per year, i.e. RM60,000, you would have accumulated RM2,745,717.86 instead. The difference that you have accumulated in your savings could go a long way.

In fact, the more you save, the better it is because it makes you less dependent on the other three factors.

Increase your ROI

The higher the ROI, the faster your net worth will grow.

Naturally, a unit trust giving you a return of 8% annually is preferred over fixed deposits with a 4% return. The investment vehicle with a higher return would grow your net worth faster.

Beware of the risk-return trade-off. It is generally understood that the higher the ROI (more than 12%), the higher the risk. You could lose part, if not all, of your investment capital, an outcome that could be a terrible setback to your net worth.

Contrary to what some people might choose to think, ROI is a driver that is not within anyone’s control.

Decrease your exposure to risk

Risks are also beyond anyone’s control.

While you’re taking active steps to grow your net worth, you’ll need to also take measures to protect yourself against any risks of losing your net worth.

The higher the risks, the higher the potential of your net worth being depleted.

Health-related risks, for example, could deplete the net worth you have spent years to achieve.

Without medical insurance, you may have to fork out a lump sum of RM30,000 during a medical emergency. However, for a small monthly fee, you can transfer this risk to an insurance company, thus preserving your net worth value.

Investment risks should be taken into account as well. The Genevva gold scam and the infamous Madoff investment scandal are two perfect examples of investment fraud. Investors had lost millions, many losing 100% of their money because they were blindsided by the upside and failed to consider the risk of capital loss. Those who suffered the loss of their entire life savings also irrecoverably have their net worth affected.

Therefore, always take the time to do your research and due diligence and study your options before you part with your hard-earned money.

Decrease your costs

Most people may not realise this but the cost can be a factor that will deplete your net worth.

Therefore, one should strive to decrease all unnecessary costs that limit net worth growth.

For example, those who have purchased properties at a higher interest rate should strongly consider revising their interest rate now that the rates have dropped.

A difference between a 20-year housing loan for RM500,000 at an interest rate of 8.6% versus 4.6% is phenomenal – with the former, you’d end up paying RM548,995 in interest, where else with the latter, you’d only fork out RM265,672 in interest payment. A quick revision here could save you money otherwise spent unnecessarily.

Another cost to look out for is the cost of estate administration upon death.

Ironically, many of us spend the majority of our energy and waking hours working in one way or another to grow wealth, but fail to realise the one major cost that could cripple all that we have strived for when we pass on.

Estate administration costs can often reach the leagues of hundreds of thousands of ringgit. Drawing up a comprehensive estate plan for your net worth or inheritance could save you and your loved ones from unnecessary costs incurred (for example, legal fees, administration fees, and fees for court proceedings).

Final thoughts

Getting a snapshot of your overall financial health regularly will give you a measurement of progress over time, motivating you to reach your financial goals. As such, net worth should be measured on a regular basis – at the very minimum once a year.

Growing one’s net worth also involves a multi-dimensional approach.

ROI may play an important role in one’s pursuit of wealth, but it is a means to an end, not an end in itself. To assume such would be just like placing all bets on a singular number in a game of roulette.

Most investors make the rookie mistake of focusing solely on ROI as a means to grow wealth without realising that there are other elements at play.

To increase your overall wealth, it all boils down to the four drivers of net worth growth – savings, ROI, risks and cost, and how effectively you manage them.

Now that you know the four cornerstones of growing net worth, it’s time to put it into practice and steer your way to a financially promising future.

Source: http://www.thestar.com.my/Business/Business-News/2015/09/26/Your-KPI-for-personal-financial-success-Net-worth/?style=biz

Which is better – Debit or Credit?

Debit and credit cards are everywhere. While most of us understand the basics of each, there are some very important features that differentiate the two. And maybe even some benefits you didn’t know about. Ultimately, which is better – debit cards or credit cards?

Rewards and Benefits

Debit cards - Some debit cards offer rewards like cash back or discounts at some stores. However, debit card reward programs have become fairly rare since the government placed new restrictions on the fees banks can charge for their debit cards.

Credit cards - Credit cards offer more generous rewards. There are credit card reward programs that can help you earn airline miles, cash back or statement credits, and other benefits. If you’re able to use credit responsibly, these rewards can end up saving you hundreds of dollars every year. Also, look for additional benefits like car insurance when you rent a car and extended warranties on some purchases.

The better choice: credit cards

Credit

Debit cards - Debit cards don’t offer an opportunity to borrow money in an emergency. If you have a large unexpected expense, such as a car repair, a debit card won’t give you access to extra funds. This could force some to liquidate investment accounts to cover an immediate need, versus having the option to finance the expense for a couple of months.

Credit cards - For those who can use a credit card responsibly, it will help build your credit score. Paying your bill in full (and on time) each month and not carrying a large balance on your card will help improve your credit profile. The length of your credit history on an account matters though – so even if you pay on time, it won’t matter much if you consistently open and close accounts, or just open too many. In fact, these behaviors will actually hurt your credit score.

Although you can be rewarded for building and maintaining good credit, you can also expect to be punished if you develop bad habits, such as missing monthly payments or rolling over large balances. These and other actions will likely hurt your credit score, making it harder to qualify for new loans.

The better choice: credit cards, when used responsibly

Fees

Debit cards - With debit cards, over-drafting your account is a risk. There are plenty of reasons why it may happen – whether it’s overspending or a check may not clear as quickly as expected. While some debit cards reject a purchase when you have insufficient funds, others overdraft your account, which carries a steep fee. According to a 2014 survey by Bankrate.com, the average overdraft fee is over $30. This penalty typically applies to every purchase you make when you have insufficient funds, so if a couple days pass before you notice, you could have easily racked up hundreds of dollars in fees.

Credit cards – In addition to a possible interest expense, some credit cards charge a sizable annual fee which may not be worth it for all consumers. Doing a quick analysis to calculate the value of the benefits (if non-cash) or how much you would need to spend to recoup your fee can help you decide.

The better choice: this one really depends on the individuals’ spending habits

Fraud Protection

Debit cards - Debit cards also have worse protection against theft than credit cards. If you don’t report the theft within 2 days, you’re liable for up to $500 of the stolen funds. If it takes you more than 60 days to notice the problem, you could be liable for the entire theft. Even if you are reimbursed by the bank, you’re still without the stolen cash while the claim is processed, which could leave you unable to meet your obligations for weeks. With cyber theft on the rise, this is a significant disadvantage for debit cards.

Credit cards - Credit cards offer much better protection against theft than debit cards. If your credit card is stolen, the most you’d be liable for is $50. As mentioned earlier, fraud monitoring and subsequent protection is a very important feature.

The better choice: credit cards

Sticking to your spending plan

Debit cards - Since debit cards are connected directly to your bank account, it can help some over-spenders stay on track, as they’re limited by the cash in their account and not the credit limit given by the credit card company. This can help some people stay within their means, as they can only spend what they have now, not what they expect to have next month when the bill is due.

Credit cards - When you make a purchase on your credit card, you are receiving a loan from the credit card company, instead of dipping into your cash reserves. This sometimes leads to overspending, and credit card debt can be difficult to overcome. If you don’t (or can’t) pay off your entire balance each month, you will be charged interest. According to a 2015 survey by Bankrate.com, the average variable credit card rate is almost 16%. If you consistently carry a balance, the interest expense will negate most of the benefits of a credit card, and likely indicates there may be other financial problems at play.

The better choice: this one also depends on the individuals’ spending habits

The verdict: credit cards

When it comes to choosing debit or credit, your choice does matter. If you’re comfortable using credit, this is often the better option given the added security, rewards, and ability to build your credit score. No matter which type of card you choose, being financially responsible, and living within your means is sure to pay off.

Are You Maximising Your Credit Card Benefits?

Credit Cards in Malaysia offer a host of benefits and rewards - but are you really making full use of what you've been given?

Credit Cards come with a host of benefits in Malaysia. Unlike their counterparts in many other countries (which do not offer perks at all!), we're pretty lucky.

Cards here come complete with merchant discounts, reward points, free services, and cashback to entice users to spend. But many users forget to use their credit card benefits, wasting tonnes of money-saving perks every year.

Have you neglected reading the benefit brochures or bank website? Check out some of the most common benefits tied to credit cards that you could have been missing out on.

Free Services

Few people realise that many credit cards come with some completely free services. These include free travel insurance, entrance into plaza premium lounges, free night stays at select hotels*, cab rides from the airport, golfing green fees, and concierge services if you are overseas.

These services are completely free but often come with some requirements and are capped per year but you still can save a good amount by making use of them.

*Free night stays are usually earned if you purchase a requisite number of nights with the same hotel on your card.

Retail Discounts

You've probably seen those signs at retail or restaurant counters - discounts if you use X or Y credit card. The sign is only the tip of the iceberg. Every bank in Malaysia will offer discounts at retail stores and restaurants but because there are so many - countertops won't display all the participating banks.

Some banks admittedly have more participating merchants than others but it's always worth a try to find out if the stores you frequent are tied into one of the bank credit cards you use. To find out, best to check the bank website or contact them for a full brochure of retail discounts. Retail cashiers are not always clued in to all promotions so best to go back to the source.

Tip: Many retail cashiers are overworked and keying in bank discounts is low on their list of priorities. To make sure you get the discount you are entitled to - remind them about it before allowing them to swipe your card.

Passes and Priority Service

Credit card companies often team up with entertainment venues such as movie theatres, recreational centres (bowling, archery, futsal, etc), and select concerts. This gives cardholders priority lanes for booking and purchase of tickets or choice pick of VIP passes.

If you are keen on attending an event, concert, movie or simply have a fun time at an entertainment centre - keep your eyes peeled for bank logos. Some entertainment credit cards offer these benefits all year round, in which case, a call to the bank is all you need.

Reward Point Redemption

Reward points often go unused as many cardholders don't pay much attention to how many points they have or unwittingly believe that redemption is a hassle. This is no longer true.

Banks today offer the convenience of even paying for purchases with points alone at select retail stores or allowing you to redeem vouchers, items, or offset your card balance with a simple redemption phone call.

Do keep an eye out for reward point expiry dates as not all points are evergreen. You don't want to miss the chance to redeem free stuff!

Cashback

We left cashback for last because it is usually a perk that is automated and you don't really have to do anything to redeem. However, you could maximise your cashback returns if you pay attention to the fine print.

Check cap amounts, peak days, or merchants where you earn more cashback. If you follow the schedule - you could earn up to your capped amount of cashback faster.

How to Maximise Your Benefits

It's great that we've listed these benefits for you, you think - but how in the world do you go about using them? It all sounds much too complicated!

In truth, it isn't. There are only a few steps required before you are on your way to free stuff from your card all year round! Whip out your trusted cards and go through these steps to find out if you're really using them for all they're worth.

1) Peruse the bank website. Almost all bank websites will feature a page with the list of benefits they offer. For card-specific benefits, you will need to look up your particular card on the bank website. For general bank retail discounts - do a quick search on the site for the page on retail discounts and promotions.

2) Check your statements. Your statement doesn't just tell you the amount you owe the bank - it also carries featured merchant ads, your reward point balance, and often comes packaged with a brochure of benefits. If you've switched to e-statement, you can still find your reward point balance on it but you will need to do the next step for the discounts.

3) Contact your bank. If you didn't receive a brochure or have lost the one you did - give your bank a call and ask them if they would be so kind as to send the brochure to your registered address. You can also call them if you are planning a particular visit to a restaurant, hotel, or merchant and would like to know if any deals exist.

4) Check your email and spam box. Banks often send emails to users when select promos are ongoing. These are usually the bigger promos with more prominent merchants but it could just be the merchant you frequent. Keep your eyes peeled when these emails come in so you don't miss another promo.

Source: https://ringgitplus.com/en/blog/Credit-Cards/Are-You-Maximising-Your-Credit-Card-Benefits.html

Six Habits That Can Land You Deep in Debt

Debt is the worst  poverty (Thomas Fuller)

If you’ve ever been in debt, you know just how soul-crushing and stressful it can be. When you’re deep in debt, you have to plan your life around it. And if your dollars are stretched too thin, you may have to sacrifice other financial goals to keep up with those monthly payments.

Unfortunately, a lifetime of debt is something Americans know too well. According to Federal Reserve figures, the average household carried a credit card balance of $7,281 in 2015. And if you exclude the households with no debt, the average outstanding balance surges to $15,609.

Digging Your Own Debt Hole

That kind of debt usually doesn’t happen overnight. While some people wind up in debt through no fault of their own, the vast majority of those who are in debt end up there after years — or even just a few months — of poor money management.

Here are some unfortunate money habits that can lead to a mountain of debt over time:

Impulse Spending

According to a 2014 study of 1,000 adults administered by CreditCards.com, three out of four people openly admitted to shopping on an impulse. Those who responded positively said they purchased things when they were excited (49%), bought stuff out of boredom (30%), shopped when they were sad (22%), made impulse purchases out of anger (9%), and made unplanned purchases when they were intoxicated (9%).

While an occasional impulse purchase may not break the bank, constant overspending may be cause for worry. And if you make a habit of putting those unplanned expenses on credit, impulse spending can cause you to spiral deep into debt over time.

Eating Out All the Time

According to Commerce Department data released this year, restaurant and bar sales overtook grocery store spending nationally in March 2015. Yes, you read that right: For the first time, we are spending more on dining out than we are on groceries — and with disastrous consequences for our pocketbooks.

While eating out is only problematic if you don’t plan for it (and can’t truly afford it), a little goes a long way. And if you’re prone to put that restaurant meal on a credit card, this habit could do a lot more than eat up your expendable income; it could cause your credit card bills to surge over time.

Going Sans Budget

Even though budgeting is nothing more than a plan for your money, the dirty “b-word” gets a bad rap. Unfortunately, going without a budget is one of the easiest ways to wind up in debt. After all, how can you be aware of how much you’re spending if you aren’t actually keeping track?

Unfortunately, a fairly recent Gallup poll shows that only one in three Americans creates a detailed monthly budget or spending plan. When you consider that unfortunate statistic, it’s really no wonder so many of us are deep in debt.

Going Without an Emergency Fund

What happens when you have an unexpected medical condition that keeps you away from work? An emergency home repair? An expensive legal situation you must take care of?

If you don’t have an emergency fund, you might be tempted to rely on credit in the short term. And unfortunately, using credit as a crutch can come back to bite you. If you rack up debt due to an emergency and don’t have a plan to pay it back, you could easily wind up in debt for the foreseeable future.

Embracing Lifestyle Inflation

If you’re growing in your career, you might enjoy a hefty raise or annual bonus. What you do with that raise can have an equally important impact on your finances over time.

If you save that raise each year and learn to live on last year’s income, for example, you could have a lot of money stashed away by retirement. But if you allow your expenses to creep up as you earn more, you will always wind up living at the edge of your means.

That’s why many people refer to lifestyle inflation as the ultimate net worth killer; if you constantly spend all that you earn, your annual bonuses and raises won’t actually help you grow rich over time.

Making Minimum Payments on Credit Cards

If you’re making the minimum payment on your credit card, you should brace yourself for a lifetime of debt. With credit cards carrying APRs anywhere from 4.9% to 24.99%, your small revolving balance could grow a lot faster than you ever anticipated.

Remember how the average indebted household carried $15,609 in credit card debt in 2015? That kind of debt doesn’t happen to those who make a habit of paying their credit card balances in full each month. No matter what, making the minimum payment on your credit card is a surefire way to land deep in debt.

The Bottom Line

While good financial habits can help you avoid debt and grow your nest egg over time, bad habits can lead to a lifetime of monthly payments — and even financial ruin.

Recognizing toxic habits early — and doing something about them — is the best way to squash bad habits and replace them with behaviors that will help you in the long run.