We’re going to share nine of the most common bad money habits that hold people back with you in this article.
#1 Bad Money Habits: Paying yourself last
I first heard of this in the book Rich Dad, Poor Dad by Robert Kiyosaki, and it’s one of the blueprints for achieving financial freedom.
Robert explains that the way people pay their bills can be broken down into two types.
The first way is the Poor People’s habit, and that is through paying yourself last so as soon as your paycheck comes in, you then pay your rent, your phone bill, and your subscriptions; you find your social plans, and then you’ll save whatever’s left over if there is even any money.
Let’s see, the second method he talks about is the rich people’s habit, and they do the complete opposite; they pay themselves first, and that is what you want to do.
Take the minimum of 10% and put that into your savings account the minute you get paid. Treat it like paying a bill.
This is so important, and by doing this, you’re guaranteeing that money will be saved and won’t just slip through your fingers through spending.
A lot of people are probably thinking there is no way I can do this; I live paycheck to paycheck, but the surprising thing is that when you take that 10% and put it away, your mind will think of ways to structure your spending and your finances to last for the whole month, and you won’t even realize that you’re saving in the background.
People don’t realize how much they spend on paying bills, buying something new, going on that weekend away, and then saving whatever’s left; however, this is a backward mentality; the key is to pay yourself first, rather than making other people richer by buying their things before you pay yourself.
#2 Bad Money Habits: Getting Comfortable With debt
It appears that debt is actually the norm these days; people use debt to buy the smallest of things, gifts, and clothes.I have a simple rule: Unless I can afford to pay for that thing outright in cash, I shouldn’t buy it with any form of debt.
Remember, credit card companies want you to be bad with your finances because that’s how they make money from this. The average credit card interest rate is 22 percent, which cancels all kinds of benefits and rewards these credit card companies are providing if you’re not able to pay them off in time.
There are exceptions, I’d say, to this rule: emergencies. Healthcare property and education fall into a different category, but you still want to be managing your debt and paying off your high-interest debt as soon as possible.
#3 Bad Money Habits: Not Having a Stockpile
This ties into Point Number One, which is about paying yourself first, and essentially, it’s saving enough so that you have a buffer behind you of about three to six months. This is super important, and it will give you peace of mind just by having this buffer kept to one side and available to tap into.
If you need it, you free up mental energy to devote to more important things. So, how do you amass this six-month buffer? It’s through paying yourself first, then putting those 10% aside.
Once you’ve accumulated your stockpile, you can begin using the extra money you’ve saved to build your investment fund and look into investments.
#4 Bad Money Habits: failing to track your income and expenses properly
Until you know what your starting point is, how do you know where you want to be?
There’s something called “lifestyle inflation,” which is when your spending rises as your income does. Rises: the more money you make, the more money you spend, and so on.
Make more money, buy a bigger house, buy a nicer car, spend more, and make more. It’s crazy how normal this is, but it is a recipe for disaster.
You want to be in control of your finances and map out where things are going. A budget tracker is super important, and you want it to include how much you’re making, how much you’re paying yourself first, and that 10%.
We discussed your expenses, such as your bills, mortgage, rent, spending, debt repayments, and so on, and you should be keeping on top of that budget tracker at least every three months. Set a date night with the tracker.
Just being mindful of their stuff and seeing those numbers in black and white will trigger you into action.
#5 Bad Money Habits: having expensive Hobbies
People like to shop, and I suppose part of this is retail therapy, but marketing, social media, and these multi-billion-pound organizations love to tell us how much we need to spend our money and spend our cash instead of keeping and investing it.
Avoid those situations or replace expensive pastime hobbies with other hobbies, and as a finance and abundance channel, I would say that if you want to spend a lot of money on something, make it skills, experiences, or education; these are developing you as a human, and these extra skill sets that you can then use later on to get a higher pay and a better job.
#6 Bad Money Habits: Failure to Save
If you want to improve your financial situation, you can either save more of your current income or make more money and create more income streams, and the ideal combination is a combination of both.
You can’t build wealth if you’re making more money and spending all of it, but you also can’t if you’re only focusing on the saving side because there is a limit to how much you can save using those cashback sites will only get you so far, so to truly build wealth you have to think
#7 Bad Money Habit: Paying Excessive Taxes
Taxes are going to be the single largest expense in your life, and while everyone has to pay them, a lot of people just pay them without considering how you can legally reduce your bill. “Legally” is the keyword term for the wealthy; they have knowledge of illegal corporate structures that come with tax advantages, and they hire tax advisors who help them minimize their tax bills.
The tax savings are incredible if you own a company, but all of this is completely legal, and if you disagree with this and prefer to pay more taxes regardless of whether or not you can legally reduce them, it doesn’t hurt to understand the tax rules and reduce that tax bill so that you can instead use the money to give back to things that directly align with your values instead of letting someone else do it.
#8 Bad Money Habit: Waiting too long to invest
When you start saving, you want to start looking at investing that money so that your money starts working for you and you want to diversify those investments so you can weather different situations and operations that come around in life but you don’t want to leave that money in a bank account because inflation is a thing and it means that you’re essentially losing money every year so I have a mixture of investments.
#9 Bad Money Habit: Not caring about finances.
If you don’t care about something, you’re not going to do your best at it, and most people don’t care about finances, and even worse than that are people who think that finances and having money are evil.
I hear people say there are so many more important things in life than money, and yes, of course there are, but life is also largely dictated by finances, so you might as well learn about them.
Master this and immerse yourself in this world where you can learn to use your finances in a way that gives you the freedom and independence you desire; it may simply be finding the right person or the right tools that help you resonate with your finances in a way that most appeals to you, whether that’s from an employee standpoint.an entrepreneurial perspective Someone who is less risky; someone who is more risky; but there will be someone who more closely matches your investing style.