avatarEmma Comeaux

Summary

The article outlines eight financial habits that contribute to remaining poor, emphasizing the importance of saving, responsible spending, and informed financial planning.

Abstract

The author shares personal experience with financial struggles and identifies eight detrimental habits that hinder wealth accumulation. These include not saving first, trying to keep up with friends' expensive lifestyles, overusing credit cards for rewards, disorganized finances, becoming desensitized to debt, lack of planning leading to unnecessary expenses, overpaying taxes due to lack of knowledge, and delaying investments. The article advocates for treating savings as a priority, setting financial goals, using credit wisely, organizing finances, avoiding unnecessary debt, planning ahead to avoid fees, utilizing tax-saving strategies, and starting investments early, regardless of the amount.

Opinions

  • The author believes that prioritizing savings by paying yourself first is crucial for financial stability.
  • Keeping up with friends who have expensive tastes can lead to unnecessary spending and should be avoided.
  • Credit card rewards should not tempt one into spending more than they can afford; credit should be used responsibly.
  • Financial disorganization can lead to a lack of progress and motivation in managing money.
  • Society's normalization of debt should not deter individuals from making financially sound choices.
  • A lack of planning can result in avoidable expenses, such as overdraft fees.
  • Many people pay more in taxes than necessary, and taking advantage of tax loopholes can reduce this burden.
  • The notion that one needs a lot of money to start investing is a misconception; even small investments are beneficial over time.
  • The author suggests that taking control of one's finances is a form of self-care and essential for long-term financial freedom.

8 Financial Habits That Keep You Poor

Stop Sabotaging Your Finances

Photo by Josh Appel on Unsplash

A lot of people face financial hardships in their lifetime, and some never escape the torture of struggling to pay their bills. This particular life difficulty has escalated greatly during the pandemic.

I used to struggle every day with money. I would go to bed thinking about whether I had enough money to buy groceries this month or not. I had horrible finance habits that led to a lack of structure in my monthly expenses and absolutely no savings.

For 3/4 of the month, my bank account was simply for looks, cause there was nothing left in it.

Here’s 8 habits that can help you grow your wealth and avoid the money mistakes I’ve made.

  1. Pay Yourself First

Most people go straight to paying bills and buying unnecessary stuff when they get a paycheck. Once all those bills are paid and stuff is bought… what’s left?

You say you’re going to start saving with what’s left of your paycheck, but there’s never anything left… which leaves you right where you started last month and doesn’t help you get ahead.

You have to set aside the money you want to put into your savings from your paycheck first thing. Then you can look at your bills, pay the necessities, and cut down on non-essentials. This will ensure that you’re saving every month while helping you to cut back on unnecessary spending.

Treat saving money like a bill. Non-negotiable.

2. Don’t Try To Keep Up With Friends Who Have Expensive Taste

Have you ever heard the saying you are what you eat? Well, you also become like the people you keep around you. If you have friends that are always wanting to go eat, stay at expensive hotels, spend a lot of money on bar tabs, etc… then it’s time to set some firm boundaries.

Explain to your friends that you can’t go out and do the expensive things they want to do because you are working towards some financial goals. Don’t get peer pressured into wasting away your money. Trying to keep up with everyone else will only let you down in the long run.

On the subject of friends and money, let's normalize setting goals together and celebrating financial successes like saving an emergency fund together. Money shouldn’t be a taboo subject and the more we normalize it the easier it is to spread financial literacy.

3. Don’t Put Everything On Your Credit Card Simply For The Rewards

A lot of the time you will wind up spending way more on your credit card than you would have spent otherwise. If you can’t afford it, then don’t buy it, no matter how much your credit line is. You will wind up wasting money that you would not have wasted if you had paid with a debit card.

That being said, credit cards are an amazing thing, and putting certain purchases on them can help you achieve rewards and a good credit score, but the key to success with a credit card is to never buy anything you couldn’t afford with your debit card and to pay off your credit card balance immediately.

4. Don’t Let Your Finances Get Disorganized

Having a bunch of credit cards, student loans, or personal loans that you don’t even really know the balance on, and a lack of direction on what to pay down and how to do it is a recipe for disaster.

If your finances are a mess then it is time to consolidate. It is essential to track your finances and track your spending for the month. When your finances have a system you can visually see the progress you’re making and that will keep you motivated to keep making progress.

You can choose a financial institution that offers all your financial tools in one place is a great option. You can hold bank accounts, credit cards, and IRAs all in one place to keep things simple.

5. Don’t Become Numb To Debt

We live in a society where almost everyone around us is drowning in debt. It’s become perfectly normal for someone in their 20’s to have tens of thousands of dollars in student and personal loan debt. This feels completely normal for us, but it is essential to financial success to not become numb to debt.

Make choices that will positively impact you. Don’t do what you can’t afford, and don’t get over your head in loans. Don’t settle for being surrounded by debt.

6. Don’t Pay Extra Because You Didn’t Plan

Say you don’t check the weather before you leave for the day, and you have to run in somewhere for a cheap umbrella despite having several at home.

Maybe you’re paying overdraft fees because you didn’t check your account balance.

These are examples of a lack of planning that cost you money that you wouldn’t have had to pay if you were prepared. Being unprepared always winds up costing you money. If you’re always having to buy things that you have at home or paying fees you could’ve avoided because you didn’t check your account then make a plan to stay on top of the situations you know you frequently let get out of hand. Just a little bit of time dedicated to staying on top of these things can save you a ton of money.

7. Paying To Much In Taxes

Taxes are going to be the single biggest expense you pay in your lifetime, so why not do what you can to cut down your payment.

Most people have a 401K through their employer that is an example of a tax loophole that can help lower your tax costs. You also have access to a Roth IRA as well as other investment accounts that will reduce your tax expenses in the long run.

8. Don’t Put Off Investing Because You Don’t Think You Have Enough Money

Putting off investing until you have more money will result in you never investing. You’re always going to be able to find a reason to not set aside money. So no matter what you have in your bank account right now it is essential to dedicate part of it (even if it’s small) to investments and savings.

You may not think your investments or your savings you put aside add up to much if you’re only putting in small amounts, but over time these choices can make a huge difference. The longer you put it off the harder you’ll have to work to get to the same level of financial freedom. The sooner you start the less heavy lifting you have to do later on.

Start investing now.

Take action today, and make sure that your finances are in order. Taking these steps is essential to releasing yourself from living paycheck to paycheck. It’s not easy, but it’s 100% worth it. You have to have the awareness to recognize whether your daily actions put you closer or further away from your financial goals.

Getting control over your finances and making an active effort to prepare for the future is one of the best forms of self-care you can practice.

Money
Money Management
Financial Planning
Financial Freedom
Saving Money
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