When it comes to financial goals, avoiding certain things can be just as important as taking action on others. Here are some things NOT to do when it comes to financial freedom.

Your financial bucket list is a tool to inspire and motivate you to work toward achieving your goals. However, it can also leave you with anxiety. It may feel like there is so much left for you to accomplish that you don’t even know where to start.

To relieve some of the stress, what if you started with things you need to let go of or stop doing to achieve your goals? Some of these habits may include your online shopping habit, leaving a balance on your credit card at the end of every month, or the feeling you need to have a bigger house. Instead of jumping in and tackling your big expensive bucket list items, try creating a reverse bucket list of the items that free up time and money by NOT doing them so can accomplish your big picture goals.
 

1) Forgo Shopping Out of Boredom

With the ease of online shopping, you can access any of your favorite stores right from the comforts of your own home. It’s easy to browse the internet for new items when you’re bored or have nothing better to do. Browsing online shopping networks for hours on end or shopping because your are addicted to it blows a hole in your budget.

Every purchase should be thoroughly considered and budgeted for. Impulse buying can wreak havoc on your monthly finances.

Instead of online shopping, try going for a walk or calling a friend. Keep post-it notes on your computer to remind you of your financial goals. If your financial goals are right in front of you, you may not be as tempted to buy meaningless items online.

2) Don’t Purchase a New Car

With great incentives and the smell of new leather, it’s easy to become tempted to buy a new vehicle. However, the average new car depreciates about 20% in the first 12 months of your purchase and then 10% every year after that. What does this information mean to a new car owner? If you buy a new car without a down payment, or if your monthly loan payment isn't high enough to cover the depreciation, you could end up owing more than the vehicle’s value.

If you decide to purchase a new car every 2 to 4 years, you’re throwing money away because of the high depreciation. To help your money go further, it’s wise to either buy a used car or keep your car as long as possible. Choosing a used car will help you find a vehicle that’s price is more compatible with its value. This will help you save more money toward your financial bucket list.

3) Avoid Upgrading to a Bigger or More Expensive House

If you’re tempted to purchase a bigger or more expensive home, it’s important to review the facts.

First, experts recommend staying in one location for at least 5 years, otherwise you’ll take a financial hit. Selling a home involves hefty closing costs of up to 10% of the home's value (real estate agent fees, title fees, taxes, repairs, etc).

Then there are the costs involved in purchasing a home, such as closing costs, home inspections, hiring a moving company, cosmetic repairs, etc.

Bigger homes usually have higher real estate taxes, higher utility bills and more maintenance. Not to mention more debt to pay down, which means a higher interest bill.

When you buy a home, buy it with the intention of living there long-term (better yet a forever home). While it’s tempting to upgrade your accommodations, staying in one location has major financial advantages.

4) Don’t Sign Up for Memberships and Subscriptions You Won’t Use

A recent survey from the Waterstone Group found that 84% of Americans underestimate the amount they spend on subscription services. This means that most Americans unknowingly spend a portion of their income without budgeting for the expense.

Reviewing your monthly subscriptions and memberships is the perfect opportunity to evaluate how you can cut back on your spending habits. You may discover that you have been paying for services you no longer use or would like to get rid of. Canceling your unused services streamlines your budget and helps you get one step closer to reaching your financial goals on your bucket list.

5) Stop Leaving a Monthly Balance on Your Credit Card

With the average credit card interest rate at 17.3%, leaving a balance on your credit card at the end of every month can be a significant cost to you. The credit card companies will love you for it.

For example, let’s say you have a revolving balance of $2,000 and your card carries 17% interest. If you made only the minimum payment (interest plus 1% of the balance) it would take you over 15 years to pay off. In the first year you would pay a whopping $321.90 in interest. Over the 15 years you would pay $2,274.29 in total interest.

There are plenty of other ways you could use your cash instead of handing it over to your credit card company. If you use your credit card on a regular basis, make sure to repay your balance every month to avoid interest costs.  If you are in a situation where you need to carry debt, keeping your credit rating in tact and building a high credit score is a good way to secure loans and credit at more attractive interest rates which will drive down your borrowing cost.

6) Don’t Over Spend on Holiday Gifts

While the holidays create warm and joyful feelings they can also put you in debt. If put every purchase on your credit card during the holidays, you could end up with a financial disaster come January. It’s important to set a realistic holiday budget in advance. Your holiday budget should include holiday dinners, wrapping, décor, and gifts.

If your family has been used to receiving a mountain of goodies during the holidays, it’s time to set a new standard. There are plenty of ways to make your family feel special and loved without showing them with special gifts. For example, decide on a volunteer activity you and your family can do together. The quality time you spend with your family will make them feel appreciated and loved without the extra credit card debt.

7) Don't Go into Debt for Education or Training that Doesn't Have a Solid ROI

Would you invest $100,000 to only make $30,000? This seems like a bad idea right? But, many Americans pay for higher education or professional training without considering their return on investment or ROI. Before you pay for higher education or professional training it’s important to determine your return on investment.

If you’re going to spend your hard-earned money and take the time to go to class, you better make sure it makes financial sense.

8) Don’t Use Your HELOC to Finance a Big Ticket Purchase

Borrowing against the equity in your home is seldom a good idea. Unless you can use a home equity line of credit or a HELCO responsibility, you should consider other options. Typically, home owners will use a HELCO to remodel their home with the intention to increase their equity over time.

But the problem comes in when home owners use their HELCO to fund large purchases such as a vacation, car or boat. While it may be cheaper to use a HELCO, than using a credit card, you’re putting your home at risk if you’re unable to make payments. Your best bet is to save for big purchases instead of risking the farm.  The overuse of HELOCs to pay for cars and boats was one of the factors that made the 2008 great recession so bad.

9) Don’t Panic During a Market Down Turn

When the stock market drops, many investors feel fear and are compelled to “do something about it”. Many people fall into the trap of selling stock funds that are "losing money" and putting it into cash that generates no return. That panic selling locks in losses, which is the worst case scenario for building a solid retirement.

You should have a plan in place to help you deal with market drops. To start with understand your risk tolerance and make sure your asset allocation matches it. Selecting the right investment mix will help ease your mind during market volatility.

If you have 50% of your assets in stocks, consider that portion of your portfolio will fluctuate. If the other 50% is in bonds, it is likely to stay the same or even go up when stocks go down.

Ignoring stock prices during a market down turn is sometimes the best way to ensure your financial future. One exception is to take advantage of the dip by rebalancing, and actually buy more stocks when they are cheap. Life path and asset allocation style funds do this for you automatically.

If you can’t handle market turbulence you should have a portfolio that has minimal risk exposure (more bonds and cash).

The Bottom Line

The financial habits above are suggestions to help you start a reverse bucket list. Creating a reverse bucket list will help you accelerate your accomplishment of your financial goals. What’s on your reverse bucket list?