When it comes to building good money habits, it often seems easier said than done. This is because money is such an emotional and sensitive subject.
Many times, we may believe that we are logical and sensible when it comes to our money choices, but a quick review of our plans would show otherwise.
Our money blueprint may show that we choose instant gratification over delayed gratification or that we save and never invest.
Understanding these habits and tackling them at the root is key to building the right money habits and supercharging our finances.
15 Poor Money Habits that are keep you broke and unhappy:
Are you guilty of any of these choices?
Read on to find out.
1. Impulse Purchases
This is one of the most common bad money habits. In today’s highly connected world, there is always something on sale somewhere, and we are often bombarded with reasons why we should buy.
This can pose a problem for even the most disciplined person, how much more if you are struggling with self-control. To tackle this, you can implement the No-spend Rule or wait 14 days before you revisit the purchase.
2. Not keeping a Record of Your Spending
Would you be able to give me a figure if I asked you how much you spent in the last month?
I know budgeting often seems like a hassle, but it’s key to smart money management. Having a good record of our monthly spending is an important habit as we are prone to forgetting what we spend on or justifying stupid expenses. I know because I used to do this.
When I started tracking my expenses, I realised that I was susceptible to so many small seemingly forgettable expenses that were draining my finances and making it much harder to spend on the big things that mattered to me.
3. Procrastinating
You may be wondering what procrastination has to do with your money habits, but here is the thing: procrastination is an obstacle to creating wealth as it often stops you from taking advantages of opportunities that come your way.
In the book, Richest Man in Babylon, we learn about a young merchant who was informed of an opportunity to invest in a tract of land. He would have had to invest 10% of his wages each month for a year, but he stalled.
He believed he had time and didn’t act, and in no time, other people took up the opportunity, and it turned out to be a very lucrative investment, with the other investors earning in multiples of what they put in.
This story was a wake-up call for me. It is so easy to believe we have enough time, but I have also lost out on opportunities because I took too long to decide, and I allowed fear and laziness to keep me in the indecisive zone.
4. Ignoring Your debt
Here’s the thing: when it comes to debt – credit card debt, loans, and mortgages, the real problem is not the debt per se, but the interest which tends to compound.
And many times, it seems like the debt is growing every day, what may have started as a $1000 balance on your card can quickly grow to thousands of dollars because of the interest.
I do understand that in such instances, getting out of debt can seem like an uphill battle.
But ignoring that debt is never a good call, as it will only get worse. Confronting it is necessary. You can approach the creditor to request an interest freeze or debt restructuring. With debt, doing something always beats doing nothing.
5. Eating out all the time
One easy way to blow your income is to get used to eating out all the time. This is even worse if you tend to indulge in unhealthy options. Which not only dwindles your purse but also puts your health at risk.
Eating out should be a luxury not a necessity. It should be something you do occasionally, that way it maintains its allure and you also save money.
6. Hanging out with people who obsess over money problems not solutions.
We have all heard the saying that ‘you the average of the 5 people you spend time with.’ Perhaps you do not fully agree, however science shows that proximity often breeds influence, even if it is subconscious or subtle.
If you spend time with people who often complain about never having enough money or all the reasons why the economy is in the doldrums, this will likely affect your money decisions even if you do not join them in complaining.
Why?
Because in such environments, it is much harder to see opportunities and possibilities as the focus is more likely to be on the issues and problems.
7. Not investing (because you’re afraid)
I realise that stories of scams and Ponzi schemes have caused more fear and panic rather than caution and awareness.
With many of us choosing to save our money rather than investing for fear of being swindled or losing it all in a recession.
This is a bad call because the surest way to wealth is through investing. There is a popular quote that says you cannot ‘save your way to wealth’. And this is true.
There are a few reasons for this:
- The interest on your savings will usually be quite low compared to an investment.
- Your savings may be lower or just on par with inflation, which means you are actually losing money.
8. Doing Everything for Free
We all have things we are good at; this may be skills that come much easier to us, and we never think much of it. Perhaps you’re good at writing and your friends usually reach out for help with their writing projects. You do these things willingly, but then the tasks eat into your time, and you never considered charging your friends for this service.
I am not suggesting that you must always charge for doing these tasks for others, but you should be willing to put value to services you provide. You may find that you have a viable income source you’ve been sleeping on. Imagine making an extra $1,000 from that skill?
9. Failing to learn about Investing.
Financial literacy is a non-negotiable for any adult and it has three main components or the three ‘M’s as they are often called:
- Money making
- Money management
- Money multiplication
Investing is a key mode of money multiplication as the idea is to have your money working for you and creating more income without your active participation.
Your ability to multiply money is key to building lasting wealth.
10. Taking money advice from the wrong person
There is a story in The Richest man in Babylon that illustrates this. One of the main characters in the book, Akad, shared a story where after saving for a year, he was looking to invest his savings and gave the money to a brickmaker who planned to buy jewellery(for resale) on his trip from Phoenicia. The Phoenicians ended up selling coloured glass to the brickmaker and Akad lost his entire savings.
The lesson here is to get money or investment advice from people who have the experience or expertise.
11. Lifestyle Creep
Lifestyle creep or lifestyle inflation is a common malady we all suffer, and it simply means that as our income increases our spending tends to increase, sometimes at a much faster rate.
Imagine that you received a promotion, and your new salary is over 70% of your previous salary. That’s a significant difference. Maybe you’ve also been meaning to move to a new place, suddenly you can not only afford to get a new place, but probably a much nicer space.
The question will then be:
“Do I get a place within my previous budget or a much better place?”
Most of us will go with the latter, which is to be expected. However, we may end up getting a place that is way more expensive (because we think we can now afford it).
And the nicer the place is, the bigger the pressure to purchase equally nice furniture and accessories. And before you know it, that extra income is eaten up by your new expenses.
12. Spending Accrued but not Received Income.
Accrued income is income that is due to you, though you are yet to receive it. This includes your salary or your fees for work done.
Now the danger with spending accrued rather than received income is that the money may not come when expected. For instance, your client or employer may fail to pay at the scheduled time, and if you have already made commitments with the money before receiving it, you become bound to these and it can create undue pressure on your finances, and a dent in your reputation.
13. Confusing Investing with Speculation.
The difference is that with investing, you research companies or investment options, diversify your portfolio, limit costs, get over your emotions, follow the facts not the crowd.
However, speculation is more about hitting mud at the wall until one stick. There is no clear strategy or enough knowledge/confidence about the investment, it is often borne by impatience and greed. True investing is underscored by time and knowledge.
We talk about Warren Buffett today as one of the greatest investors of all time, but he utilised these two things to his benefit: over 60 years investing and undertaking comprehensive research on the markets and stocks he is interested in.
14. Ignoring the effect of childhood limiting beliefs and money beliefs.
Our belief systems affect so much of what we do and the choices we make.
I have met and read about women who believe it is wrong for a woman to earn money, and those who believe women should only be stay at home wives and mothers. Such a person will clearly struggle with opportunities to earn money.
For some of us, faulty teachings as children warped our mindset about wealth, especially the wrong teaching within some Christian circles that poverty is close to piety.
I used to think that not having much money was a way to show I wasn’t greedy or a rich fool.
However, as I started working and learning more about biblical principles, I realised how harmful this belief system is.
Some of us may be struggling financially today because we still see money as the enemy and something that corrupts the heart and mind.
What about you?
What are your money beliefs and how have they played a role in your money choices?
15. Hiding money problems from your significant other.
Financial problems are still a major reason for divorce, and it makes sense. Money habits and money mindset affect our make-up and filter into our relationships.
If we often make bad money decisions, we are likely to want to hide this from our partner, this shame and secrecy can cause communication problems which end up creating tension and a lack of trust in the relationship.
Basically, hiding your money problems is never a good idea, no matter how bad things may be or how disappointed your partner will be. You owe it to them to be honest. You can of course seek help if you are not sure of how to broach the subject.
Bonus: Not Getting Professional Help
While reading blogs like Pineapplly can provide you with useful information about making and keeping money, it cannot take the place of seeking professional advice from a financial or investment adviser.
In His books, Rich Dad, Poor Dad and The Cashflow Quadrant, author Robert Kiyosaki talks about the importance of having a team of advisors including a lawyer and an accountant or financial advisor. I concur. While we cannot all afford to have a team of advisors at our beck and call, we can yet invest in one-off sessions with advisers, as and when required.
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