Even after years of living paycheck-to-paycheck, you might find that you’re no closer to achieving your financial goals. The good news is that you can learn from others’ mistakes and break these bad money habits for good to live life on your terms instead of those set by society.
We all know that “money doesn’t grow on trees.” But what most don’t realize is how many poor people there are in America – despite having a job and working hard!
With such an alarming statistic, it’s more important than ever for people to focus on making their money work for them, not the other way around.
You’ve probably heard of many people working two or three jobs to make ends meet. Others may still live in poverty despite being out of college and having a full-time position with benefits.
So, how did these individuals become so financially destitute? They form lousy money habits that are doomed to keep them poor no matter how hard they work.
These financial vices may be cultural or learned – perhaps their parents were broke, so they never had a chance to know better and are destined to repeat the same mistakes.
You don’t have to make all these costly blunders yourself and break these bad money habits for good to live life on your terms instead of those set by society without spending too much in the process!
Please read our list of common pitfalls below and learn how to break bad money habits before it becomes a real issue.
Living As If Your Income Will Increase Instantly
If you’ve ever seen an episode of Antiques Roadshow, they have a winner every episode. These people find something at their garage sales or thrift stores and take it to be appraised, only to discover that they’ve found a treasure.
Thanks to its age and rarity, the object’s value is multiplied by thousands! But most of us don’t live in this fantasy world where we regularly stumble upon a buried treasure and instantly achieve financial freedom.
Instead, live below your means, don’t overspend, and break bad money habits.
Buying Things Just Because You Have A Lot Of “Spare” Income
You may think you have more money than your friends, so why not indulge yourself? After all, one person’s excess is another person’s “surplus.” But if you make impulse purchases because you think you can afford them instead of because you need them, you’ll find that your bank account or credit union account will be virtually empty in no time. Or your credit card balances will be constantly increasing!
Not Budgeting Your Money At All
Budgeting may seem like an unnecessary task when things are going well. But if you don’t have a blueprint for using your hard-earned income, it’s easier to decide what to do with your cash based on impulse and whim. And pretty soon, you realize nothing is left at the end of the month!
One of the most important aspects of personal finance is budgeting. This process can seem unnecessary when things are going well, but it’s easier to make decisions based on impulse if you don’t have a plan for your money.
Pretty soon, nothing will be left at the end of each month! Having a budget forces you to decide how much money should be spent on food, entertainment, clothing, rent/mortgage, and other necessities.
It also leaves room for small indulgences like going out to eat or seeing the occasional movie.
One of the most important things that children learn from watching their parents is a sense of financial responsibility.
If children don’t see their parents balancing a checkbook or watching how much they spend, it is up to the parents to ensure that these lessons are taught in other ways.
Assuming That Everyone Else Knows How To Save Money Better Than You Do
Even though many people grow up watching their parents struggle financially, this doesn’t mean they know better than you how to manage your money. That’s another case where “don’t do as I do, do as I say” can backfire and lead to a downward financial spiral.
People often feel they need a financial advisor or something else outside themselves because their parents have struggled financially. The best way to avoid this cycle is by investing in your education. But the truth is, if you don’t know how to do it yourself, then there’s no other way than to learn.
Many people grow up watching their parents struggle with money management issues, so when these same people turn 18 years old, they assume that “don’t do as I say” means don’t let them manage their finances either!
But while we all want our children not to go through the hardships many adults face today, including rampant unemployment rates and crippling debt, there is no need to hand over all the reigns when it comes to spending and saving.
How you spend your money is just as important as how much of it you are making!
It’s Okay To Spend Money On Yourself Every Once In A While For No Apparent Reason
Buying something for yourself now and then doesn’t hurt anyone – right? Not necessarily!
One of the most expensive habits to break out there is buying things that make us happier at the moment but don’t improve our lives overall.
That fast food meal, latte, or phone game app may seem harmless every time you buy it – but these are small, recurring expenses that add up quickly over time.
If you want your splurges to be worth it, think long-term: how will this purchase improve my life?
Ignoring Debt Collectors When They Call You At Home And Work
You may be able to ignore them for a while, but eventually, you will have to deal with your debt collectors.
Don’t let the chance of embarrassment keep you from paying off what you owe in full! Other people care about their credit scores, too!
Dealing with this issue as soon as possible might help protect your credit score and give you more flexibility when it comes time to borrow money again.
Not Being Able To Budget Based On Your Actual Incomes And Outgoes Over Extended Periods Of Time
Budgeting is not just something that should be reserved for when you first get a job.
After all, your financial situation changes and evolves – sometimes more rapidly than you might be aware!
Instead of making budget changes quarterly or even yearly, make them monthly. This way, you can see your income and expenses changing month-to-month. If there’s a significant discrepancy in either category, you can fix the problem sooner rather than later to minimize any damage done.
It’s time to start breaking bad habits and creating good ones.
Frequently Letting Your Car Insurance Or Homeowner’s Insurance Lapse
It would be best if you did not change car insurance providers lightly. Switching insurers will often result in higher premiums, regardless of which company you go to.
But shrugging off these expenses and keeping yourself insured is essential for many reasons, not the least required by law. If you have assets, you want to be covered if something happens to them.
Not At Least Saving Whatever Extra Money You Have Per Month
It can be very tough to save money since anything extra that comes into your bank account gets spent immediately on whatever catches your eye at the moment.
And when you do trip and fall a little short of having enough cash in your account at the end of the month (as we all know, this happens sometimes!), you convince yourself that it’s okay because you’ll make up for it in the next paycheck.
And pretty soon, it becomes a vicious cycle where nothing builds up in your savings account!
Instead of living paycheck-to-paycheck, put a portion of your income aside for unexpected expenses and concentrate on saving for the future.
That will free up some mental space to save up the rest of your money for retirement or other future goals, but it’ll also help you feel less stressed out when life throws you a curveball and you’re not prepared.
Not Making Time For Financial Planning In Your Schedule
If there’s no block of time in your schedule dedicated to dealing with your financial affairs, it’s too easy to push off any investment thoughts until later (and then later again and again).
Managing your finances sporadically instead of in chunks defined by rolling periods (such as the week) can take time to get a complete view of your financial situation to launch any action plan.
Instead, dedicate a block of time into your schedule for spending an hour or two every month planning out the rest of the month and future months’ finances – this way, you can make sure that everything’s getting looked after correctly!
Not Taking Advantage Of 401(K)s Or Similar Retirement Savings Options
Not saving money is one thing, but investing it and letting it sit there? That’s just crazy talk!
If anything, you should take advantage of any retirement options your employer offers, such as 401(k) plans.
Even if you’re not rolling in the dough right now, try to contribute at least something per paycheck; then, you can contribute more once your income is higher than before.
Over time, this stache can be an excellent benefit for your overall financial well-being – as long as you’re rolling in dough eventually!
Not Having A Plan When Making Major Purchases
No matter how small or large the purchase, make sure you have a plan before buying anything.
Whether it’s a toaster oven or a vacation trip across the country, even if that plan is “I’m going to research where I should buy this item and look it up online until I find some good deals.” At least you’re planning something rather than just throwing money away for no reason.
If you only spend money when you have a game plan beforehand, you’re far more likely to get the most value out of your money.
Not Having A Backup Plan Or Emergency Fund
As soon as you begin preparing for something like an emergency fund, build in some backup plan that’s not directly linked to your savings.
Whether it is through opening up another bank account in case the first one gets frozen or hacked or having a stack of cash hidden away somewhere other than at home (in case there’s a break-in).
Just make sure that you have some safety net set up to handle things if something happens and goes wrong with what you were relying on.
Not Setting Up Auto-Payments For Your Bills
What are you even doing with your life if you still need to start using a debit card and auto-payments for your bills? It’s much easier than writing checks (which can get lost in the mail) or using paper money, which is easily misplaced.
It also makes sure that all of your payments are being made on time without you needing to remember any due dates!
Need some motivation to get started? Make this a New Year’s resolution and break bad money habits.
Not Being Aware Of Your Credit Report And Score
How would you know if someone was stealing your identity or applying for credit in your name? By checking your credit report and score periodically, that’s how.
You also might notice some oddities: if every six months (or more frequently), the identical inquiry pops up on your report with no application information listed, that could be a sign that someone is trying to steal your identity.
Besides these apparent benefits, it’s good practice to see what’s going on with your credit regularly. Everything from car loans to mortgages can be determined in part, if not entirely, by your credit score.
Not Taking Advantage Of Free Financial Education Resources
Even though you might have no money to spare for classes, you should still be taking advantage of free financial education resources such as online seminars or workshops held in your area.
Especially since these things tend to jump into relatively advanced topics (investing primarily), it’s essential to know the basics first. When those more advanced topics arise, you’ll already have a foundation established later.
Just make sure not to let this information go in one ear and out the other, as these lessons only apply once!
You’d be surprised how many people refrain from taking advantage of free financial education resources.
While they might think taking a “free” course is out of their budget, it’s essential for them (and you) to realize that paying for something like this with one lump sum is cheaper than spending hundreds on a credit card! And then you have all that credit card debt.
Those extra savings can go toward your debt payoff or be used as an emergency fund!
Not Using Cash Or Paying Cash For As Many Things As Possible
While it can be nice to use a debit card or credit card, that doesn’t mean you should forget about paying with cash.
While cash has the obvious benefit of not being associated with any specific account like a debit or credit card, the best reason to always keep some on hand is for emergencies.
What if your car breaks down and needs repairs, but your bank account is empty?
Then you’ll have no choice but to get the money somewhere else (like a payday loan lender) – this is why having an emergency fund set up is essential and keeping at least one stack of cash around. Break bad money habits by ditching credit cards and a cash-only lifestyle.
Not Having Savings Goals And Prioritizing Them
It’s hard to come up with some concrete numbers for savings goals since it depends on what you’re saving up for, but if you don’t have any in mind, then that’s a good sign that you need to take your financial education seriously.
It doesn’t matter if this is cold, hard cash sitting in the bank account or putting money away toward retirement. Every little bit helps, so why not start thinking about where things like your debt payoff go?
Only Budgeting For Monthly Expenses And Not The Extra Bills You Forget About
By ignoring those small miscellaneous expenses (like going out to eat or buying a new pair of shoes) and by only budgeting for the big ones (mortgage, rent, car payments), you might be overlooking a lot of more minor expenses that add up over time.
The problem with this is twofold: if you budgeted for more of these little things, then it might mean your debt payoff plan wouldn’t have to be as drastic!
In addition, you also would have more wiggle room if something goes wrong (like needing a new tire blowout or computer crash) and not even having enough money on hand to deal with the situation. Break bad money habits by working that budget each month.
Not Learning About Investing And Avoiding It Completely
If you want to make sure that your retirement years are nothing but carefree and worry-free, then learning about investing should be at the top of your list.
Only by investing can you ensure that you will have enough money to cover your bills in old age, and if you don’t want to learn how to invest, then at least make sure that you know the safest places your retirement fund can go. That will build better money habits.
Not Knowing What’s Happening With Your Taxes And Not Getting Help
No one likes dealing with the IRS, but you can’t avoid it: you need to make sure that when tax time comes, you know what portion of your taxes goes where and that you have someone experienced enough to help you.
Don’t settle for a CPA who does this and everything else, along with other unrelated services. You want them to be an expert in taxes alone so they can advise you appropriately.
You don’t even have to spend much money on one, either: inexpensive CPAs tend to offer more individualized service rather than being just another number like those expensive ones tend to do.
How do you break bad money habits once and for all?
Not Living Within Your Means
Just because someone has a fancy business card with their name and company logo on it doesn’t mean you should automatically trust them -most of the time, that’s a surefire way to ensure they’re not good at what they do!
You don’t want to get too specific (like asking how long they have been investing), but you can narrow down your choices by determining what kind of services they offer.
If there are no fees involved, that’s the best option for you since it saves money in the long run: constantly think about what will cost more or less over time before making any big decisions.
Stop borrowing money. Car and student loan debt are the highest monthly payments behind a mortgage. Borrowing also includes not paying off debt and continuing to borrow money.
Not Following A Budget Closely Enough
While it’s true that you need to be careful about not delaying the gratification of getting your debts paid off, it’s also just as important to ensure you follow a budget.
Otherwise, you might have too much money and need help figuring out what to do. Get into a routine of writing down your expenses on paper or on a computer – whatever works best for you – so that at least then, when the bills come due, you don’t have any excuses for why you can’t pay them.
If you aren’t aware of your spending, consider tracking it. This way, you know where your money is going.
Not Saving Up For Big Purchases
It’s easy enough to get sucked into using credit cards to finance big purchases by taking advantage of credit card rewards programs and not carrying a balance. Then, you have to worry about the credit card bills piling up.
But the one thing you need to remember about this is that while you might get rewarded for your spending, it’s still important to know when enough is enough.
If it’s “free” money, then why stop, right? Wrong, because if you don’t set some spending limit on yourself, you’ll eventually be in debt without realizing it!
The more time that goes by and the longer those interest payments accumulate, the greater the chance of never paying them off altogether.
It’s time to break bad money habits once and for all.
Final Thoughts On Break Bad Money Habits: The 25 Habits That Keep You Poor
The money habits keeping you poor may be deeply ingrained, but it’s never too late to change. There is a way out of the cycle and build financial success if you’re willing to take some risks and commit to changing your financial situation.
Try something different. Doing the same things repeatedly is yielding you the same results. It’s time to make some changes and step forward from how you have been living your life. Try making financial decisions based on solid information by budgeting. Or cut out those impulse buying moments, even if they are small, so you don’t have financial stress at the end of the month.
You’ll need support from family members or friends who understand what it feels like when everything seems hopeless. They can encourage you through your challenges and celebrate with you in your successes along the way to end bad spending habits.
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