Financial habits to leave behind in 2025
Life Kit
Deep Dive
What is the 'no-buy challenge' and how did it help Alicia Berman?
The 'no-buy challenge' is a movement where individuals refrain from purchasing non-essential items for a set period, such as 30 days, a few months, or a full year. Alicia Berman, who works in beauty and fashion marketing, decided to take on this challenge after realizing she was overspending. She created a list of items she wouldn't buy, such as beauty products, jewelry, and home decor, and focused on spending only on things that enriched her life, like dinners with friends and books. As a result, she was able to pay down a significant portion of her debt.
What is 'lifestyle creep' and how can it impact financial health?
Lifestyle creep occurs when increased income leads to higher spending on non-essential items, often without conscious planning. For example, someone might start dining out more frequently after receiving a raise. This can snowball into unnecessary financial obligations, such as upgrading homes or cars, which can quickly consume the extra income. Financial experts like Paco de Leon and Yanely Espinal emphasize the importance of being mindful of spending habits and avoiding unnecessary upgrades to maintain financial stability.
How can individuals manage unused subscriptions to save money?
To manage unused subscriptions, individuals should review their credit card and bank statements, as well as subscription tabs on platforms like Google and Apple. They should list all active subscriptions, note renewal dates, and identify which services are unused or unnecessary. For services that are occasionally used, downgrading to a cheaper plan or canceling altogether can save money. Additionally, setting reminders to cancel free trials before they convert to paid subscriptions can prevent unnecessary charges.
What is a balance transfer and how can it help with credit card debt?
A balance transfer involves moving existing credit card debt to a new card with a 0% interest rate for a promotional period, typically 12 to 18 months. This allows individuals to pay off the principal without accruing additional interest. While balance transfer cards often charge a one-time fee of 3-5% of the transferred amount, this can still be cost-effective if the debt is paid off within the interest-free period. It’s crucial to make minimum payments on time to avoid penalties.
Why is negotiation important, and how can it be applied to medical bills?
Negotiation is a valuable skill that can be used to reduce costs in various areas, including medical bills. Jared Walker, founder of Dollar For, advises patients to request itemized bills to verify charges and dispute any inaccuracies. Additionally, individuals can ask for financial assistance or charity care based on income. If assistance isn’t available, negotiating a settlement amount or requesting an interest-free payment plan can significantly reduce the financial burden. Persistence and advocacy are key to achieving favorable outcomes.
- No-buy challenges involve abstaining from purchasing non-essential items for a set period.
- Alicia Berman's no-buy year resulted in significant debt reduction.
- Mindful spending prioritizes purchases that enrich one's life.
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