Do your money habits make you look old? In other words, are you handling your finances and making transactions in ways that many would consider outdated?
If you’ve been slow to adopt new — and not-so-new — developments and technology in the field of personal finance, your reluctance to change your ways could be costing you time and money. Worst of all, it could be putting your financial security at risk. Here are five old money habits you should kick today.
1. Paying With Checks Instead of Debit or Credit
If you whip out a checkbook at the checkout, it’s a telltale sign that you’re part of an older generation. That’s because virtually no consumers younger than 35 prefer to pay with checks, according to a report by the Federal Reserve Bank of San Francisco.
If you’re writing checks and not using online banking, it’s up to you to keep track of all your transactions in your check register so you don’t overdraw your account. However, the bigger problem with using checks for transactions is the security risk.
If your debit card is lost or stolen, just call your bank and report it. “The card will immediately be blocked, and no further damage can be done,” said Nick Clements, co-founder of financial education site MagnifyMoney. You will get a new debit card sent to you in the mail, usually at no cost to you. Check with your bank to see if it charges any fees.
“If you lose a checkbook, you will find that your life has become much more difficult,” he said. For example, some banks will charge you to cancel all of your checks. “The only foolproof way to solve the problem is to completely close your checking account and open a new one,” Clements said.
Then, any direct deposits or debits you’ve established would have to be shifted. “It is a painful process,” he said.
2. Carrying a Lot of Cash
Cash is still widely used by adults of all ages. In fact, 40 percent of consumer transactions are made with cash, according to a report by the Federal Reserve Bank of San Francisco. Certainly, paying with cash can be a good way to avoid spending more than you have and racking up debt.
But consumer expert Andrea Woroch said that older adults, such as her father, are more likely to carry large amounts of cash; whereas younger adults tend to pay with a debit or credit card, or with their smartphone. While 38 percent of adults ages 18 to 29 and 35 percent of adults ages 30 to 44 have made mobile payments over the past year, only 21 percent of those 45 to 59 and 13 percent of those 60 and older have made payments using a mobile phone, according to a report by the Federal Reserve Board.
Mobile payment options, such as Google Wallet and Apple Pay, can be a safer way to pay because a unique code, rather than your card number, is transmitted to the merchant. Woroch said you can use an app such as Venmo to transfer money to someone else if, for example, you want to split the tab for a meal with a friend.
Even using a debit or credit card can be safer than carrying cash. If your wallet is stolen, your liability for unauthorized credit card transactions is capped at $50. The same goes for unauthorized debit card transactions if you report them within two days. But you can say goodbye to any cash in your wallet if it’s stolen or lost.
3. Sending Checks Instead of Using Electronic Bill Pay
There was a time when the only way to pay bills was to mail them or visit your service providers and hand over what you owed. Now 74 percent of households pay bills electronically through their financial institutions and billers’ websites, according to Fiserv, which provides financial services technology.
There are plenty of benefits to online bill payment. For starters, it saves you time and money because you don’t have to buy stamps to mail bills or waste gas to drive to a service provider to pay in person. You also eliminate the risk of your check getting lost in the mail, Clements said. When you make a payment online, you get a confirmation number instantly, which you can use for proof of payment, he said.
Plus, you can set up automated payments through your bank or service provider so that recurring bills always are paid on time — eliminating the possibility of late fees. Using electronic bill payment also can be more secure. By getting statements by email or accessing them online and paying bills electronically, you remove paper sources that have your personal information, and reduce the risk of thieves getting this information through your mail, according to Ally Bank. After all, mail theft is one of the most basic ways for someone to access your personal information, according to identity theft protection service LifeLock.
4. Calling a Broker to Buy or Sell a Stock
Younger investors are more likely than investors ages 50 and up to make investment transactions online, according to a study by consumer research firm Nielsen. “I don’t know a person my age or younger who has ever traded a stock, fund or ETF by telephone,” said Jim Wang, a personal finance expert and creator of the blog Wallet Hacks. “It’s not only a habit few young professionals have, but it’s a very expensive one, too.”
For example, investment company Vanguard charges users $7 to buy and sell securities online. But you’ll have to pay $25 to make a trade by phone, unless you have an account balance of $500,000 or more.
5. Holding Onto Too Much Company Stock
Although older adults are known for having more workplace loyalty, according to the Bureau of Labor Statistics, you shouldn’t feel compelled to show loyalty to your company by investing in its stock. The number of employers offering company stock as an investment option in retirement savings accounts, such as 401ks, has been declining. However, nearly 40 percent of plan sponsors still offer this option, according to a report by Aon Hewitt.
If you invest too heavily in your company’s stock, your portfolio won’t be diversified, and it will be too closely tied to the performance of just one firm. After all, if the company’s performance tanks, your 401k balance is going to go down with it. Plus, some companies place restrictions on employees’ ability to sell the stock. Ideally, you shouldn’t have more than 10 percent to 20 percent of your total investments in company stock, according to FINRA.