8 bad money habits that keep you poor forever. Would you agree that most African’s are poor not just because, they don’t earn much but rather they have a bad money habits?
This does not apply to Africans alone; indeed it does apply to other persons from the white countries. The real fact is, if you give this kind of people $670,000 today, 10 years will come and they will be still at where they were without any improvement in their life. If you ask of what they did with the money, you will be surprise of the kind of response they may give you.
The problem with these people is not that, they don’t want improvement in their life no, but the reality is they don’t know how to manage any small amount of money (they have bad money management) that comes into their life.
James and Daniel were given $500 each by their friend, James being financially illiterate bought two assets that were putting money into his pocket month after month. Daniel, on the other hand, knows nothing about money (he had a bad money habits). He spent the money just as he normally does to any small money that comes into his hand. He never thought about investment, savings, and also how to put the money into work for himself.
So tell me, whom among these guys will be rich or financially independent in the next 5 years?
Surely it will be James, because he knows how to manage his money and to put it to work so that it can earn more for him. What of Daniel? Do you think if he doesn’t make an effort to learn something about money management will $7000, 0000 make him rich? Never, because all what he thought is spending, spending he does not give any thought to earning.
I don’t want you to be like Daniel in the example above, so I have compared 8 bad money habits that you should deal with. Knowing these bad habits about money will help you to manage your money well so that you can become financially free or that rich person that you dream of becoming in the future.
1. paying yourself last (Top Bad Money Habit)
Here’s what I mean by this, as soon as you get paid you pay your rent, your phone bill, your gym membership, you go out to dinner, you buy something nice for yourself. And you’re planning to save if there’s any money left at the end of the month. The problem is there’s never any money left to save.
Sound familiar people who get ahead financially do the exact opposite. They pay themselves first that means that before they start paying their bills, swiping their cards left and right and giving money to everyone else in their mother except for themselves. They put a portion of everything they make into their own pockets first, then they pay their bills and live on what’s left.
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They prioritize making themselves richer versus making other people richer. People who are good at saving money all understand something called Parkinson’s Law. So Parkinson’s law is the principle that demands will always expand to consume all available resources. That’s why if you have a week to finish a project, you end up taking all that time to finish it and you were probably pretty inefficient with your time. Whereas if you have just one hour to finish that same project you’ll be super focused and efficient and still get it done.
So work expands to consume all available time and it’s the same with money. Your spending will expand to consume all available money whether you have a hundred dollars or a hundred thousand dollars. Your expenses will keep increasing to consume all the money that you have. That’s why making more and more money isn’t always the answer and saving money after you do all your spending is just not going to work.
What to Do Instead Is to Pay Yourself First
Because your spending will always rise to just eat up all that money. You got to pay yourself first you got to treat saving money like a bill and your daily habit. So as soon as you get paid to commit to setting aside 10% or whatever percentage that you can handle and put that towards savings and investments. Then just live on what’s left, so if you want to stop letting money slip through your fingers and you actually want to start keeping some of what you make for yourself then give up money habit number one for good because it is bad to have such kind of money habit.
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2. Trying to Keep Up With Friends Who Have Expensive Tastes
Do you have friends who always want you to go out to expensive restaurants and go shopping with them and go on trips with them and stay in nice hotels? If you have friends with bigger budgets and yours too small, then it’s okay to be authentic and say, hey I can’t do that because I’m working towards some financial goals right now and I need to save money, it’s out of my budget.
If there are real friends they’ll understand everyone has very different levels of tastes as well as very different budgets. Trying to keep up with everyone around you is going to leave you broke and in debt this includes friends as well as people you see on social media.
The reality is the average American has very little in savings and an average of thirty-eight thousand dollars in debt and that’s not even including mortgages. So a lot of what you see in terms of amazing lifestyles on social media and whatever often is just an illusion. In fact, I personally know someone who is always posting Instagram photos of herself traveling to all kinds of exotic locations. It really looks like she has this glamorous awesome life but the reality is she has $20,000 in credit card debt and has zero in savings and investments.
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What to Do Instead
Don’t be fooled by a lot of what you see, is not real and chasing experiences just so you can post a cool photo on Instagram or look good to everybody else is a recipe for ending up broke. Would you rather have to look rich or would you rather be rich if you dream about becoming financially independent? One day you have to stop caring what everyone else thinks about you because no one else is going to make it happen for you.
You just have to learn how to speak up for yourself, don’t be afraid to turn down invitations or don’t be afraid to just adjust cheaper activities for you and your friends. Because chances are people will respect you for having your priorities straight and it’ll probably inspire them to reassess their financial priorities as well.
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3. Putting Everything on Your Credit Card for Cash Back Rewards and Award Miles
Now don’t get me wrong credit cards are amazing. I love my credit card I haven’t paid for a flight in years thanks to the award miles that I rack up on my United Explorer card but often times I find that people end up spending way more on their credit card than they would have spent otherwise. That basically just cancels out all the benefits of having these credit card rewards I’m freaking guilty of this as well.
When I’m considering whether to make a purchase or not sometimes I find myself justifying it because I’m like hey well, at least I’ll get miles for it and this is even if I can’t actually afford it. So this is a very, very slippery slope ever since I realized this pattern I’ve just stopped putting everything on my card. Here’s what I do, instead for everyday small items like coffees and cab rides I just pay for it with my debit card in cash.
If there’s anything that’s a hundred dollars or more like facials and hotels courses things like that I basically put it on my credit card to get the award miles but then I pay it off immediately like within seconds of making the purchase and I just do it all on my phone.
That way it forces me to only buy things I can afford to pay for in cash, while also allowing me to get those vials and turn all those amazing credit card benefits. Before I started doing it this way, I would usually just rack up a balance, and then every month I just get shock at how much I’d spent because putting things on plastic really has a way of just making you spend a little to mindlessly.
Especially if you’re justifying your spending because of the rewards, so the bad money habit to give up is to make sure you only put things on your rewards credit card if you have the money to pay for it in cash and don’t justify purchase just because of the points or miles.
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4. Having Disorganized Finances
Disorganized finance is basically another way of keeping your head in the sand. If you have credit cards open everywhere student loans that you don’t really know the balance for and you’re not really sure what you’re spending on every month. Then it’s really time to consolidate. There’s a lot of really awesome apps out there that make it super easy to track all your financial stuff.
For example, I used to use mint and I really liked it. You can connect your bank accounts and your credit cards and they’ll look at your spending and your income and tell you you’re your spending looks like every month. You can also put in all your accounts and look at your network then how it changes over time and it really only takes a few minutes to set up. It’s totally worth, your time and ever since I’ve actually switched over to tracking my finances in a spreadsheet versus apps.
Of course I’m just a big nerd and I love my spreadsheets. I look at my spreadsheet to update my net worth every month, that way I can see the progress that I’m making month by month and not only is this hugely motivating but it also forces me to keep my finances very organized because I know where all my money is at all times.
Keeping your finances organized is choosing a financial institution that offers a wide range of services so that you can do all your financial stuff in one place. The fewer online usernames and passwords you have to keep track of the better. For example, I have my personal checking account as well as most of my investment accounts like my Roth IRA and my say and blah, blah, blah I have all that fidelity.
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So I could access all my financial stuff with one username. It is really convenient another place that offers a full suite of services is betterment, which offers a checking account of a high-yield savings account, as well as different investment, accounts for all your financial goals. Either way with technology and all these amazing new platforms. It’s really not hard to get and stay organized with your finances.
The key is to just get up that courage to really look at where you stand financially and I know it can be a humbling and sobering moment for some people but until you know what your starting point is. It’s impossible to get to where you want to be. You know, how can you get to where you want to be if you don’t know where you are now. So give up the bad money habit of staying confused about your finances. Build a habit of staying organized and looking at your numbers regularly.
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5. Numbing Yourself to Debts
We live in a society where practically everybody has debt. It’s become totally normal for someone in their 20s to have tens of thousands of dollars of student loan debt. It’s totally normal for someone in their 40s to have a mortgage, a car loan, credit card debt, and possibly even be paying off their student loans still. But listen up just because everyone else lives with debt doesn’t make it okay for you to live with debt either.
When I was applying to colleges I had the option to go to USC, which is a school in LA on a full ride for my tuition. However, the school that I really wanted to go to was NYU and I chose to go to NYU because that’s the school that I really wanted to go to. Except that I didn’t get anywhere near as much in scholarships to NYU as I did to USC and honestly sometimes I wonder where I would be if I just went to USC and didn’t graduate with student loans.
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Don’t get me wrong I don’t have any regrets, I really loved going to NYU but because debt is so normalized in our society, I just didn’t even think twice about signing away my life to student loans as an eighteen year old.
It’s the crazy bottom line, don’t get into debt if you don’t have to just pay for things in cash. Don’t do things if you can’t afford it don’t go into debt for college and months unless you absolutely have to and you know you will get a job that will allow you to pay that off quickly. Don’t get a car loan to buy a car; don’t get a mortgage if you’re still paying off student loans. It’s just too much, America is one of the wealthiest countries in the world yet somehow it’s considered ok to have crop loads of debt these days.
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6. PAYING EXTRA DUE TO LACK OF PLANNING
I used to be the queen of cheap $10 umbrellas. I always forgot to check the weather and I just end up getting caught in the rain and having to run into a drugstore to just buy another umbrella. Despite having quo is to live with debt, but don’t settle for the status quo. Do whatever you need to do to live a debt-free money habit. Like multiple umbrellas at home not planning in advance and being caught unprepared always ends up costing you money.
So this could be things like having to take an uber instead of using your subway card. It could also be like paying overdraft fees because you didn’t check your account balance. Another way is you put things on a credit card and you just end up paying all these interest charges because you didn’t set money aside for unexpected.
Unexpected expenses no I’m all about Yolo and living spontaneously. If you’re always having to buy things you already have at home or just paying extra fees and interest because you’re unprepared then just take a few extra minutes to plan ahead.
Check the weather before you leave the house. Leave buffer time in between appointments, look at your account balance every so often and things like that. Even just a little bit of planning will save you tons of money and at the end of the day having money in the bank is what allows you to really Yolo as much as you want money.
7. Paying Too Much As Taxes
Taxes are going to be the single biggest expense in your lifetime. So why not do it, you can cut down on your tax bill. Most of the tax blue bowls are for rich people who own assets and businesses. There are a lot of tax loopholes available to the average person as well. For example, most people have a 401k through their employer, and contributing to your 401k is a way to directly reduce your taxable income.
The HSA is another way to reduce your taxable income and also everyone is eligible to open an IRA either a traditional IRA or a Roth IRA and these are investment accounts that shelter your dividends and profits from taxes. So I’ll talk more about ways to cut down on your tax bill in the next article right here, so definitely check it out to learn more because there are a lot of ways you can start paying less taxes starting today.
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8. Putting Off Investing Until You Have More Money
Like I mentioned in my first tip, putting things off like saving money and investing for the future. That is a very slippery slope, you might be thinking that you’ll start doing it one day when you have more money. But more often than not that becomes a never-ending cycle of procrastination and excuses. There’s always going to be reasons, why you can’t invest enough money, not enough knowledge, not enough time, other priorities, etc. But the longer you put off investing the harder you’ll have to work to get to the same level of financial freedom as someone who starts investing earlier.
Someone who starts investing at age 20 can become a millionaire by age 50 by investing just 180,000 of their own money. However, if they were to wait until age 30 to start investing. They would need to invest almost twice as much of their own money to reach millionaire status by age 50. This means the sooner you start the less heavy lifting you have to do and the less of your own money it takes to get to a millionaire. Even if it’s just $50 a month, start investing now, don’t wait it’s really easy to get started investing.
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It’s not about discipline and deprivation, it’s about taking care of the future. It’s a form of self-care and self-care is fun because it makes you feel good and makes your life so much better. If you’ve recognized yourself doing any of these bad money habits, just be gentle with yourself, don’t beat yourself up about it because most of us don’t learn this stuff in school and we don’t learn it from our parents.
Most of the people who have good money habits usually just learn it the hard way by screwing up and wanting to do better. I’m definitely not perfect by any means, either so even though I’m a blogger that talks about money a lot. What I talked about in this article is the stuff that I needed to be reminded of.
As well it’s all about having the awareness and the financial literacy to notice whether your daily actions bring you closer to your financial goals or take you further from your financial goals and it’s never too late to replace bad money habits with good money habits and to just improve your relationship with money.
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So there you go “8 bad money habits that will keep you poor”. Please comment bellow of any bad habit about money you know that I did not mention. For More Check These Bad Habit on Wikipedia and wikihow