Nelson Mandela once said that “poverty is man-made.” This statement implies that poverty results from man’s actions, beliefs, and habits. If you’re currently struggling financially, chances are that your financial struggles are born out of your bad money habits.
There are numerous money habits that keep you poor and prevent you from excelling financially. In this post, we will be examining 14 money habits you should never have if you must gain financial freedom.
You have the potential to become rich, however, you must get rid of habits that are impeding you from building wealth.
What Is Money Habit?
Money habits are your regular methods or ways of spending and managing money. These habits are usually a part of you, and they strongly determine whether you will succeed financially or not. If you want to improve your finances and become rich, you need to ensure your money habits align with core financial principles that ensure success.
What Are The Things That Make You Poor?
Some of the common things that make you poor are your spending habits. You would waste your finances when you don’t know how to spend money cautiously. This could result in multiple debts, making you struggle financially for a very long time.
Can Your Money Habits Make You Rich?
Your habits determine the direction of your life, even when it comes to your finances. To become rich, you must groom yourself financially and adopt better money habits that will improve your perspective on money.
Some of the world’s richest people, such as Bill Gates, Mark Zuckerberg, and Elon Musk always talk about how one’s habits can make one generate wealth or remain poor.
If you are interested in digging into rich people’s habits, quickly check out this post that sheds light on 10 habits of rich people that could transform your life for the best.
14 Money Habits That Keep You Poor
To reach your financial goals faster, here are 14 money habits you must avoid:
1. Not Having An Emergency Fund
If you think having an emergency fund is not important, you are exhibiting one of the most common money habits that will make you poor.
When Covid-19 broke out, no one was expecting it. People lost their jobs, while some people’s paychecks were slashed. However, people who had been building a solid emergency fund were able to cope during this unfortunate emergency that struck the world.
If you haven’t been saving money, an emergency fund is a very good reason for you to start saving right now. This fund is expected to cover at least 3 months of your monthly expense; if it costs around $10,000 to cover your monthly expenses, you need to save at least $30,000 to stay financially secure during emergencies.
2. Spending More Than You Earn
One of the money habits that keep you poor is living above your means. If you are losing more money than you earn, you are setting yourself up for financial failure. You can’t give what you don’t have.
If you earn $12,000 monthly, you can’t spend $14,000 on monthly expenses; it’s simple logic. The moment you try to spend more than your financial capacity, you will begin to incur a lot of debt.
This also means you would be living paycheck-to-paycheck without having any savings in your emergency or retirement fund. This is a very difficult situation so many people are struggling to get out of.
On the other hand, you shouldn’t even spend as much as you earn. It’s not a safe practice to exhaust your entire salary before the next one comes.
3. Not Building A Budget
Failing to budget your income is one of the habits that keep you poor. Building a budget is essential to improve your finances and manage your money efficiently. You need a budget to avoid impulse buying, especially when you’re not making much money.
A good budget will also help you track your expenses every month; you’d be able to determine how much leaves your bank account, as well as where the money goes.
To avoid making one of the money habits that keep you poor, you need to start budgeting your hard-earned money ASAP. If you want to learn more about budgeting, here is an article that explains how to budget your money in 5 simple steps.
4. Taking Interest-Free Loans
Just because you can borrow money without interest doesn’t mean you should keep borrowing. This is one of the habits that are making you poor.
Many organizations or stores that offer interest-free loans are trying to lure in a lot of debtors. You may not have to pay any interest, but that doesn’t change the fact that you must pay back the borrowed money.
Please don’t take that loan unless you are sure you desperately need the money and can repay it. You will only hurt your finances if you do that.
5. Having Only One Source Of Income
Surviving on only one source of income can be risky. Except you are earning twice the average salary of an American, you should think of ways to increase your earnings by creating another source of income.
Besides, being able to cover your monthly expenses shouldn’t be your only goal. You must consider saving for retirement, embracing investment opportunities, and coping during emergencies.
If you live only on one income, it could be challenging to save money or invest. It would be best if you look forward to having another income stream to avoid making one of the money habits that keep you poor.
6. Failing To Save Extra Money
Keeping that extra cash you got from your bonus or from selling an item is very important. You aren’t supposed to spend every amount of money that enters your bank account. Some cash should be saved for future purposes.
The extra money you save can be very helpful to your emergency fund. When the need arises, such money can be used to pay debt, make an investment, or pay medical bills. If you aren’t used to saving extra money, you are exhibiting one of the habits that keep you poor.
7. Relying On Loans To Cover Expenses
Since some people’s salaries aren’t enough to cover their expenses, they resort to borrowing money as a means of support. This is not a bad decision. It only becomes harmful when you make it a habit.
When you constantly borrow money for other expenses, it makes you lazy. You would get used to the lifestyle instead of finding creative ways to boost your income.
Loans should never be your source of income. You need to learn new methods for multiplying or growing your money. You can start a side hustle or a small business to raise some money aside from your main income.
8. Hoarding Money
Some people are fond of hoarding money simply because they are desperate not to go broke. Although their intentions are pure, the approach is seriously flawed.
Hoarding money will never make you richer; it’s just one of the habits that will make you poor. If you want to be rich, you need to make money work for you. Instead of hoarding it, invest it in something profitable.
There are many micro-investment platforms online where you can invest as little as $10 and get a 20% return within a year. Imagine investing a few thousand dollars; you will make a decent amount of money.
9. Resorting To Retail Therapy
Some people find therapy in jogging, hiking, or engaging in any basic exercise to relieve stress. For some people, however, it’s an entirely different situation; they relieve stress by spending money in a retail store. Of course, it’s very weird, but some people actually do it.
If you ever find relief from shopping or spending money, you need to work on yourself. Perhaps you should speak with a financial advisor to break this habit since it’s one of the habits that are making you poor. Relying on retail therapy would only cripple your finances and leave you broke.
10. Spending Your Savings
You should not tamper with your savings until you really need the money. Spending your savings is like destroying a large sand castle you spent several hours building.
If you must grow your emergency or retirement fund significantly, you shouldn’t spend from it. It is one of the money habits that keep you poor. It will help if you disincline yourself enough to ignore your savings and manage the rest of your money.
This is why it’s important to live frugally. By being frugal, you would be able to manage your income and still avoid touching your savings. Here are some frugal living tips that will help you live below your means while saving money.
11. Failing To Invest
If you must become rich someday, you need to start making investments right now. Failing to invest when you have the opportunity is one of the many money habits that keep you poor.
Investing your money is the only way to multiply it and turn it into an asset. Buying shares is one of the common ways to invest your money without losing a penny, especially when you invest in a large company that is thriving.
But before you go ahead to invest anything, make sure you speak with an expert. The market changes, and you need to know the right place and time to invest in getting a good return.
12. Failing To Learn From Your Mistakes
The only good thing about making mistakes in life is that you get to learn from them. Please take a look at your past, there are certain mistakes you must have made with your finances; no one is perfect when it comes to managing and growing money. You need to learn from these mistakes if you won’t want to repeat them in the future.
For example, if you have ever spent your savings on something irrelevant, you should never allow such a thing to repeat itself. If you have ever struggled to pay debts, you should learn and avoid incurring debts in the future.
13. Using Credit Cards For Points
Credit cards with rewards may seem like a good excuse to spend money. However, you may end up biting more than you can chew. Many financial institutions offer cashback rewards to compel you to keep spending money without control. You may think you are getting points for using the credit card, but you are also incurring so much debt simultaneously.
This has to be one of the biggest money habits that keep you poor. Moreover, if you are using credit cards for points, you may spend money on what you don’t need simply because you want to win more points.
14. Impulse Buying
Impulse buying is the habit of making unplanned or spontaneous purchases. In the process of making impulse purchases, you are likely to spend much more than you’re supposed to.
Knowing how to avoid impulse buying is essential to living frugally, and simple things like shopping with a list can help you avoid impulse buying.
As long as you are disciplined to stick to the proposed shopping list, you won’t exceed your spending limit. Moreover, shopping with only cash can prevent impulse purchases. Going to the grocery store with only cash teaches you to be cautious with your spending.
Final Note: Money Habits That Keep You Poor
Exhibiting bad spending habits will only set you up for failure. Thankfully, you have learned some of the most common money habits that keep you poor. If you break these habits and adopt better money habits instead, you will be grateful in the future for making that decision.
Also, don’t neglect vital things like setting up a budget and building an emergency fund. These are some of the basic monetary principles that will help you build a better and stronger financial life.
Pin this for later!
