Today, we’re diving into a critical topic that affects so many of us: bad money habits. Over the last 25 years, while consulting with clients from all walks of life, I have learned a lot about myself and my clients’ spending habits.
One thing I’ve learned is there are common spending habits that can lead us into financial hardship while keeping us locked up in the poor house.
Our spending habits not only impact how we run our households, but how we operate our businesses too.
Now, most of us remember the Great Recession of 2007 through 2012. During this time, countless businesses crumbled under the weight of persistent financial missteps. I saw many families and businesses lose it all.
But here’s the good news: by recognizing and rectifying these bad habits, we can pave a path to a more secure financial future.
Now, let’s dive into the 7 Common Bad Habits that Keep You Poor!
#1 – Living Beyond Your Means
Bad Habit #1 is living beyond your means. This means spending more money than you earn. Whether it’s through credit card debt, loans, or simply not budgeting correctly, this habit can quickly spiral out of control and keep you in a cycle of financial stress.
Using credit cards to cover monthly expenses when your income doesn’t support your lifestyle is a sure recipe for disaster.
#2 – Not Having a Budget
Speaking of budgeting, bad habit #2 is not having a budget at all.
How do you know what you can afford to buy without knowing where your money is going? With a budget, it’s much easier to keep track of exactly where your money is going and what it should be spent on. For instance, a very common mistake I see all the time is overspending on non-essentials. And by overspending, this can quickly drain resources, and hinder your ability to save or invest in your future.
I see this a lot with young couples who move into their first apartment.
In their excitement, they make the mistake of purchasing everything they want on credit, as they start their new lives together.
They don’t even realize they are setting themselves up for financial stress which happens to be a leading cause of divorce.
#3 – Neglecting Savings
Bad habit #3 is a sneaky one that most overlook. It’s not paying yourself first.
We pay our mortgage, our cars, our cell phones and everything else without fail, but many people constantly forget to pay the most important person in the entire equation “Yourself.” Saving money is crucial for financial security, yet many neglect it. Whether it’s because we think we need to earn more before we start saving money or we prioritize spending on immediate wants. By not saving, this leaves you unprepared for emergencies or future goals, and investments.
I always suggest you put away 10% of your pay each paycheck, and before you know it, you will not even know it’s missing because if you stay within your means, you will spend accordingly.
Funny how that works!
#4 – Impulse Buying
Put your hand up if you ever get bored. Well, I know my hand’s up. I certainly get bored at times. As it turns out, boredom is best friends with bad habit #4, and that’s impulse buying. So, how does making compulsive purchases sabotage our finances?
Here’s an example. See if you can relate. It’s the weekend and not much is going on. We decide to head to the mall, or if the weather is not so great, we conveniently jump on our computer to innocently pass the time.
As the sale items catch our eye, we see a discount that is just too great to pass up. And then it happens—FOMO kicks in. We don’t even need the sale item, but we can’t afford to pass it up, or at least that’s what we tell ourselves. How could we dare miss this opportunity? So, in the shopping basket it goes.
Next, we head over to the electronics store. It is so lovely and exciting. We walk in and gaze at all the wonderful electronic updates; the latest phone models look really nice, and before we know it, we buy a new phone that we didn’t need.
As you can see, impulse buying is another sneaky habit that can drain your bank account, especially with readily available online shopping just a few clicks away. But these impulse buys add up over time and they can completely derail your financial plans.
My advice to avoid impulse purchases is to stay away from stores unless you know what you are looking for and always shop with a shopping list. And when it comes to online shopping, be sure to unsubscribe from retailer emails, delete shopping apps from your phone, and block shopping websites in your web browser to win the fight against impulse buying.
#5 – Not Investing or Planning for the Future
Living in the moment is a beautiful thing, as long as you remember that your finances cannot simply just live in the moment too. In fact, the financial decisions you make today, will stick with you forever.
And with that said, this brings us to bad financial habit #5, failing to invest in your future.
In my experience as a wealth building strategist, I have seen couples who make very good money waste it all by constantly dining out at expensive restaurants, taking luxurious vacations, gambling, buying new cars, and insisting they have the latest and greatest gadgets at all times.
Living in the moment, they say… As the years go by and they reach their 50s, they are setting themselves for a rude awakening.
They’ll need to work much longer in life, possibly for the rest of their lives, in order to just barely make ends meet. Failing to invest or plan for your financial future is a common mistake. Whether it’s for retirement, education, or significant life events. When we don’t put money into long-term investments, we miss out on potential financial growth, peace of mind, and security. So before you blow it all, you better think twice!
#6 – Ignoring Debt
If you cannot pay your credit card bill in full at the end of the month, you are ignoring debt, and this is a surefire way to stay stuck in a fiscal mess.
Why do I say that?
The high interest rates on these convenient instruments keep you locked into monthly payments that pay very little on the principle. Increasing debt on credit cards not only negates any discounts you receive on purchases, but the interest rates can make you pay double or triple for the same discounted item.
Debt, particularly credit card debt, will eat away at your income and it will make it difficult, if not impossible, to achieve financial milestones.
Whatever you do, do not take credit card debt lightly. Start making extra payments on high interest credit cards first. Then, you can work on paying off your car loan or student debts next.
#7 – Not Seeking Financial Education
Last but not least is bad financial habit #7, not seeking financial education. I have seen lots of situations where individuals get sick, and the medical bills are just difficult for them to manage when combined with all of their everyday personal expenses.
When these unfortunate situations arise, people start realizing real quick the mistakes they made with their finances, and only then do they start looking at how to correct this. But at this point, it’s a little too late.
That’s why we must be proactive about learning financial literacy. We must understand basic economic concepts, like interest rates, investments, and budgeting which can all lead to better money decisions. Fortunately, in today’s world, there’s a wide variety of online courses available to get you up to speed on how to handle your money. So, the information is widely available to everyone. And as the saying goes, why wait to get started, there’s no time like the present.
Conclusion
Breaking these bad money habits isn’t easy, but it’s worth the effort. If you work on one bad habit at a time and work on it consistently, you will see results. By being mindful of how we manage our finances, budgeting effectively, saving consistently, and investing wisely, we can all take steps towards financial freedom and security.
Always remember, there is always time to start making positive changes to improve your financial future.
Let’s Talk
Now, if you don’t already know me, my name’s Sonia Narvaez. I’m a licensed CPA and wealth-building strategist with over 25 years of experience.
If you have any questions about how to take advantage of the latest tax savings strategies, don’t hesitate to contact us. To get your FREE complimentary consultation with a member of my team, simply click the scheduling link in the description below, and pick the time that works best for you.
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