14 Money Habits Keeping You Poor

Are you trapped in a cycle of living paycheck to paycheck, struggling to save money? In this video, I reveal the 14 common money habits keeping you poor and suggest a positive money habit alternative. So if you're ready to find out what's been holding you back, make sure you watch this video till the end. A money habit is any habit or behavior that involves how you earn, save, spend, and overall deal with money. Bad money habits will keep you poor while good habits will help you achieve your financial goals and build wealth. Now you can't just stop a habit. You'll need to replace it with a good habit and practice it. Number one, lifestyle inflation. One of the primary culprits that keep individuals from building wealth is lifestyle inflation or lifestyle creep. As soon as your income increases, so does your spending. Like the saying goes, the more you make, the more you spend. Just because you make more money doesn't mean you need to drive a more expensive car, rent a bigger place, wear more expensive clothing, and take fancy vacations. It's essential to resist the urge to upgrade your lifestyle with every wage increase or salary boost. It's understandable that you want to enjoy your life to the full extent of your income, but there must be a balance if you want to save money and gain financial stability. Yes, treat yourself, but also delay gratification and treat your future self by saving more whenever your income increases. Number two, keeping up with others. Comparing your financial journey to others can lead to unnecessary spending and debt. Each person's financial situation is unique and it's crucial to make decisions based on your own goals and priorities rather than trying to keep up with the Joneses. The Joneses are broke. Most people look like they're doing well financially, but it's only because we can't see their bank account and how much debt they have. The goal is to be rich, not look rich. So instead of keeping up with others with more expensive stuff and a luxurious lifestyle, keep up with others with more zeros in your bank account and having less debt. Number three, no financial goals. Without clear financial goals, it's challenging to make purposeful decisions about spending, saving, and investing. Set specific measurable and achievable financial goals to guide your actions and help you stay on track. A goal without a plan is just a wish. If your goal is to save $10,000 in a year, you'll need to break it down. How do you plan to reach this goal by saving $830 for a month? How do you plan to save this much? What expenses are you going to trim and how will you find ways to increase your income? The more guidance in your goals, the more successful you will be. Beginner financial goals you can strive for include paying off $16,540 of debt in 18 months, building a three to six month emergency fund of $11,300, or saving $60,000 for a down payment on a house. Number four, spending more than you make. Living beyond your means is a surefire way to financial instability. If you make $100,000 a year and spend $110,000 a year, you are less financially secure than someone who makes $50,000 a year and only spends $40,000. If you spend more than you make, you're getting yourself into debt. If you can't properly manage your spending, it may be time to get rid of the credit cards and line of credits so it isn't possible to spend more than you make. Now, if you actually want to build savings and grow your wealth, creating and sticking to a budget can help you manage your expenses and ensure that you're not spending more than your income allows. Number five, only saving your money. While saving is essential, relying solely on saving without investing may limit your wealth building potential. Money can make you money, but not just in a savings account. Yeah, you might get a bit of interest, but you'll be lucky if that even covers the rate of inflation. Money in a savings account is meant for two things, an emergency fund or short-term financial goals. With any medium or long-term goals, you should try to obtain a higher rate of return in different investment opportunities. Investments to choose from include GICs, bonds, stocks, ETFs, peer-to-peer lending, REITs, and mutual funds. Before you choose, just ensure they align with your risk tolerance and financial goals. Number six, not taking risk. Avoiding financial risk altogether will hinder your potential growth. These risks may look like not getting an education, not switching employers, not investing, and not starting that business you always dreamed of. No risk, no reward, but don't just take any irresponsible risk. You'll need to do your homework and take calculated risk. This means you need to take careful consideration of the potential outcome. You need to gather as much information as possible, weigh the pros and cons, develop a plan, and determine whether the potential reward is worth the potential risk. By embracing calculated risk, you can open doors to opportunities that contribute to your overall financial success. Number seven, not budgeting. Budgeting is a fundamental aspect of financial management. Not having a budget may be the reason why you can't see lifestyle inflation, why you spend more than you make, and why you can't make achievable financial goals. A budget is telling your money where to go instead of wondering where it all went. Regularly tracking your income and expenses helps you identify areas for improvement, allocate funds wisely, and ensure you're working towards your financial goals. Budgeting can be time consuming, so to make budgeting a habit, use a budgeting app or a spending account, which can automatically track your spending and see where you stand in your budget. Number eight, not learning financial literacy. Financial literacy is the knowledge of budgeting, taxes, credit, earning, saving, investing, and anything else related to personal finances, enabling individuals to make informed decisions about money. Managing your money is important, and the more informed you are, the more efficient you will be with your money. If you know nothing about financial literacy, growing your wealth and being successful will be more difficult. Everyone should have a basic understanding of financial literacy. To improve your financial skills, you'll need to get educated. This type of education can be found in books, news, YouTube, podcasts, websites, courses and programs, apps, mentors, financial advisors, and more. Financial literacy is probably the biggest key to your financial success. Number nine, paying yourself last. Paying yourself last means exactly how it sounds. When you get paid, you pay your landlord for housing, you pay Honda for transportation, Apple for your phone, Netflix for your entertainment, and Burger King for your food. Then with whatever money you have left, you pay yourself by putting it into your savings. That's if you have any money left, but if you pay yourself first, you ensure your financial goals remain a top priority. When you prioritize saving and investing for your future before allocating funds to discretionary spending, building your wealth becomes more achievable. Number 10, bad debts. Bad debts such as credit card debts, car loans, and personal loans can erode your financial stability. If you need credit to make a purchase, it's likely you can't afford it and you're living beyond your means. On top of this, bad debts come with high interest rates, meaning you're paying much more for a product or service than you first intended. Distinguish between good and bad debts. Good debt uses leverage to increase your income like student loans, business loans, or mortgages for rental properties. Bad debts do not provide any monetary gain. Bad debt is debt that makes you poor. Good debt is debt that makes you richer. Number 11, paying too much taxes. Everyone who earns income will have tax obligations. Usually the more you make, the more taxes you pay. I'm not saying don't make more money to avoid paying taxes. I just want you to be aware that there are Explore tax saving strategies and take advantage of available deductions and credits to optimize your tax situation and maximize your after-tax income. Now if you really want to reduce your taxes, you'll need to forego the employment income and consider starting your own business and making business income. In this world, there are many more strategies and deductions to minimize your taxes. If you want to learn more about reducing your taxes, check out the video up here or look for the link in the video description. Number 12, taking advice from broke people. Everyone has an opinion and might be willing to give advice. Your parents, family, friends, co-workers, and acquaintances. But are you getting the right advice from the right people? Would you get business advice from someone who never owned a business? Would you get investing advice from someone who doesn't invest? So you shouldn't get financial advice from broke people. Taking their advice can be a risky proposition as their perspectives may lack the depth of experience and success necessary for sound financial guidance. Although friends and family may offer well-intentioned advice based on personal struggles, it may not be rooted in effective strategies for wealth building or financial stability. It's essential to consider the source of financial advice, seek those who have achieved financial success, and demonstrated the ability to manage your finances effectively, aka a high net worth individual. Number 13, one source of income. Gone are the days where one source of income is all you need. The cost of living and inflation has caused what used to be called good jobs to not be so good anymore. Additionally, solely relying on one source of income can leave you vulnerable if anything ever happens to that income source. A layoff, a medical condition, or a company going bankrupt may cause you to lose your only stream of income, which can cause financial difficulties. If you really want to build up your savings and net worth, different streams of income like investments, side hustles, a business, or a part-time job can provide more financial stability. And lastly, number 14, not having an emergency fund. An emergency fund or a rainy day fund is money that is easy to access just in case you need it for an emergency situation. Losing your job, car breaking down, roof leaking, medical illness, and essential travel are all examples of emergency situations. So an unplanned urgent expense that may have high consequences if not dealt with. First, aggressively aim for a $2,000 emergency fund. Ease off the gas, then keep building until you reach three to six months of living expenses. Keep these funds in a high interest savings account, ideally the one with the highest interest rate. This emergency fund has many benefits. It gets you out of a financial jam. It provides peace of mind. It allows you to take more risk. It provides more flexibility in decision-making, and it prevents you from getting into debt and paying interest. Breaking free from these money habits will require continuous effort and commitment to positive financial change. By understanding these habits and adopting healthier financial practices, you can pave the way for a more secure and prosperous financial future. Furthermore, if you want to keep educating yourself on financial literacy, check out the video on the right hand screen. Thanks for watching. Keep making money moves.