Have you ever heard of the saying poverty is a choice? There is a good chance that you might have dismissed it as something coming from a rich a**hole. However, the reality is that most people remain poor because of the way they manage their money and bad financial habits. From buying things just to show off to bad or no investments, people make a lot of financial mistakes every day.
Remember, that your money habits are essential to your financial health, and them being bad will only result in poor life. While this topic has a lot of stuff to discuss, we have decided to focus only on the key factors in the blog just to keep it concise.
Here are 5 bad financial habits you should evaluate right away to get back your finances on track.
Related Article: 12 Basic Budgeting Tips to Increase Your Wealth
1. Spending more than you earn
People with dreadful spending habits often spend more than they earn. This ultimately leads to debt and loads of other financial problems. According to a survey, about 93% of poor people have disclosed that their spending goes without any budget, which is one of the main reasons for their condition.
You need to get a budget first if you wish to take control of your spending. Always stick to your budget and do not go over it unless under extreme circumstances. Things like subscriptions you don’t use, wasteful online purchases, eating out every day, expensive clubbing, etc., eventually add up and come back to bite you.
To get out of this poverty trap, you must be more watchful towards your expenses. Form these good spending habits to make a change:
- Organize your purchases using a budget plan
- Pay yourself before paying your living expenses
- Track your expenses using a budgeting tool or app
If you are looking for a simple budgeting template to record your weekly or monthly expenses, check out our budgeting templates.
2. Not saving money
Not saving any money is at the root of all bad financial habits. Your wealth won’t rise an inch until you’ll start saving money. Not saving money promptly can lead to some long-term consequences, and in the end, you’ll have nothing left. As Warren Buffet repeatedly says, you should save/invest first and then spend the rest of your income.
Savings are pretty much non-existent among today’s Americans. A study shows that about 63% of Americans today are living paycheck to paycheck. Start saving today to not become a part of this statistic.
Remember, saving money should be your top priority when it comes to financing management. Follow these tips to start saving money now:
- Open a high-yield savings account
- Avoid spending a significant amount of money at once
- When possible, use gift coupons and royalty cards in your everyday purchases
- Start a retirement savings plan as early as possible
3. Relying too much on credit cards
Relying on credit cards is basically inviting more debt. It is one of the worst and most expensive financial decisions among Americans. Don’t get us wrong. Credits cards can be extremely beneficial if you are smart about your spending. Sadly, most people don’t follow that. People use credit cards for impulse purchases and run-up debt.
If properly used, credit cards can help you boost your credit score and save money through various offers and discounts. However, using credit cards for every single purchase is a complete no-go, especially if you are planning on spending more than what you earn.
Follow these tips and become credit card independent:
- Cut down your debt payments and create a plan
- Create a tight budget that includes almost all of your expenses
- Aside from emergencies, avoid using credit cards for any type of transaction
4. Not having a solid budget plan
Bad budgeting decisions or not having a budgeting plan at all can have a seriously negative impact on your financial condition. Your financial strategy should start with creating a solid budget plan and sticking to it. This can make a remarkable change in your financial health, and you will start noticing the benefits almost immediately.
A solid budget plan will help you to not spend beyond your means and will keep you in line. Without a budget, you risk spending more than you earn with your credit cards and fall into a never-ending debt trap. There are various tools available in the market right now to help you with budgeting.
You can use an app like TrueBill to track your spending, lower your bills, cancel your unwanted subscriptions, and more. You can even get your spending insights and analyze your spending patterns to match your savings goals.
Consider these benefits and start budgeting now:
- Increased focus on financial goals
- Better monitoring of debt and savings
- Visibility of weak links in your financial plan
- Immediate improvements within a few days
5. Meaningless shopping
In today’s age of Amazon and online shopping, it is simply irresistible to go online and browse through interesting stuff. For most people, it doesn’t stop with that, and they end up buying meaningless shit which doesn’t have much use for them. In some of the worst-case scenarios, these purchases happen to flex their status.
Whatever the case may be unnecessary shopping is a terrible financial habit that you should abandon now. Even if you are in a good financial position, this will affect your growth by limiting the money you have for savings and investments. It can impair your money management and damage your budget (if went out of control).
Here are some tips you can follow to stop or reduce your saving expenditures:
- Postpone all major purchases by a week at least (if you don’t need it by then, you just don’t need it)
- Identify your real needs and then take decisions
- Delay or ban shopping from time to time
- Use zero-based budgeting to give your money a purpose
These are some of the bad financial habits that are keeping you poor. If you can recognize some of them in your own habits, consider quitting them now for a financially independent future.
And remember, if you’re unable to do this, you’ll have only yourself to blame at the end of the day. You are the one to decide the financial state, therefore take the necessary actions shortly before it’s too late.
Don’t forget to download our FREE personal finance toolkit that can help you identify the best tools you can use to manage your wealth!