5 Common Money Habits That Keep You Poor
This post contains affiliate links; please read our Disclosure for more information.
Money habits can be the difference between financial security and being broke.
There are certain habits that kill your financial confidence and lead you to not being your best financial self.
Habits die hard, but the cost of not working on them can be damaging to your financial future.
These are habits I once used to have and had to work on changing them.
Let’s unpack these habits and show you what I did to overcome them.
Table of Contents
5 Common Money Habits That Keep You Poor
Most things about financial success is based on your money habits.
Habits are the simple actions you do over and over again.
It’s these simple things you repeatedly do that can make all the difference.
Much like a the damage a small leak can cause overtime if not stopped.
These money habits hinder you from achieving financial success and hugely impact your financial position.
Here are the habits and how I overcame them to start managing my money better.
No Control Over Your Money
Living a lifestyle where you get paid and do whatever you feel with your money without thought is very easy.
We somehow form habits that will always keep us just about paying our bills but no full control over the remainder.
However, this leads to a lack of knowledge of what is really happening with your money.
This leads to not having any savings, living on debt, or simply living paycheck to paycheck.
Control is inevitable, either you control your money or the lack of it controls you.
This destroys your financial confidence as you won’t know where you’re heading towards, meaning you’re not building a financial future.
Money is like emotions, you must control it and keep it in check otherwise you’ll end up doing what you’ll later regret.
Solution
Gain control over your money. I appreciate this is easier said than done, but it’s necessary.
I know it’s not sexy but the genuine thing to do is to set up a budget.
We actually call our ‘budget’ our Money Plan.
This gives us a different feeling and view of it, it is a plan for our money. Which is the whole point of budgeting.
Start by taking stock of how much you are spending in the various categories in your life, then work out the total of it all.
To get an accurate reflection do this exercise over the last 3 months.
Then take some time to reflect on where you want to be a month, 3 months, 6 months, or one year from now.
This will be the start of you setting financial life goals.
Then be brutally honest with yourself, do your current spending habits empower you to achieve those goals?
If you want to be debt free but a lot of your money is going towards luxuries and going out, you may want to reconsider your situation.
Ultimately, the aim here is to start to control where your money is going so you can direct it towards your goals.
This boosts your financial confidence like a good night’s sleep boosts your energy.
Control nullifies a number of money related fears and doubts.
Lack of Savings
There was once a time where our credit cards were our ‘emergency fund’ so we were always in debt.
Not having any savings depleted our financial confidence because we relied on debt, which would not lead us to a brighter future.
Living paycheck to paycheck is a dangerous lifestyle as emergencies and unexpected events always occur that will demand financial attention.
There are various reasons for the lack of savings but lifestyle inflation is prominent amongst us as young adults.
This is essentially where our lifestyle spending habits increase as our income increases.
The more we earn the more we spend.
Solution
Start saving, today!
Saving is not an amount, but a habit.
Whether you save a 1% or 50% of your income is irrelevant if you don’t have any savings.
The key is to ALWAYS save.
The initial aim for savings is having an emergency fund as a foundation.
It is largely advised to have at least 3 months of your living expenses saved.
This emergency fund will cover you when life happens!
Your car could need repairs, you may lose your job for various reasons, or you may want to pursue a passion which means you stop working for some time.
Think of this as if your living costs are paid for over a 3 month period, what would you do differently in your life?
I once had a contracting job where you only get paid when you worked, this emergency fund plugged the gap when I took time off work.
Keeping Up With the Joneses
A massive cause of lifestyle inflation is keeping up with the joneses.
We buy things we don’t need with money we don’t have to impress people who don’t care!
This is very different for various people but trust me, there are spending habits in your life that are influenced by the people around you.
For instance, everyone around you drives a new model BMW or an AUDI, now you’re thinking of getting one too.
All your friends wear designer clothes so to feel part of the crew you start to look at buying designer clothes.
You realise that all the couples you know are homeowners and you start to feel left out because you’re living in your partner’s parents house.
Yet the cars they drive are on finance, they have credit card debts because of the designer clothes, and that house was paid for by their parents.
The list can go on and on, but the point stands. We have a natural desire to “keep up” with the lifestyles of people we see due to comparing your life to others.
This desire is a major reason why most of our lives run on debt, yet we think the Joneses (whoever they are in your life) are different from that.
The truth is, what you see is a superficial representation of an idea that they have their finances together, but the grass is NOT always greener on the other side.
This mindset is a destroyer of your financial confidence because your financial decisions are based on what others are doing, not based on your own self-assurance or your goals.
Solution
Stop comparing yourself to others!
Stop comparing your journey and your situation to others, it’s impossible that you’ll have the same outcome.
Analyse your lifestyle choices and, again brutal honesty, ask yourself which of these are influenced by others and media.
What are you doing in your life right now that doesn’t really bring value to you or even make you happy and fulfilled?
Cut off the things that don’t serve you well and start doing what makes YOU happy and fulfilled.
Learn to spend money wisely on that which matters to you and which impacts those you love.
Secondly, be grateful and appreciative of your life.
No matter where you are and what’s going on, you have something to be grateful for.
Gratitude keeps me grounded to appreciate what I have, where I am, and who I have around me.
This shift in mindset is the key to not being jealous and wanting what someone else has.
Money Fears
Money fears are real and they dwarf your financial confidence.
One of the biggest destroyers of financial confidence is the fear of making mistakes.
This is totally understandable because financial mistakes can be costly, both literally and figuratively.
I remember when I was scared to invest money I spent almost 6 months waiting for the “right time” to start investing.
I was really waiting for the day I woke up without the fear of losing my money.
You may have fears around losing money so you hoard all the money you can, even if it means you don’t visit your family or buy your child a gift.
Fears influence our money habits and we find ourselves making decisions out of fear and not from a self-assured confident mentality.
Solution
Face your fears!
Acknowledge that your fears are there and they are real. Analyse the cause of the fears and dive deeper into them.
I was scared to invest because I didn’t want to lose my money.
Underneath that fear was that the consequence of losing my money would be detrimental as it was all the money I had.
I did 2 things, built an emergency fund and learnt more about investing.
This eliminated my fears as if the worst happens, I still have the emergency fund.
Really analyse the reasons behind your fears and deal with the root cause problem.
Overcoming fears will boost your financial confidence more than any amount of money will.
Not Asking for Help
This is a strange one because financial confidence is all about you being self-assured in yourself.
However, this is understanding and realising that you cannot do this on your own.
You are not the holder of all financial knowledge and money tips so you will need some help along the way.
Identify people who can support you on the journey and equip you to better build your financial confidence.
There is no shame in asking for help when you need it, in fact I’d encourage you to do it.
If you want to go fast go alone, but if you want to go far go together.
In this context, if you want longevity in your financial confidence you can make it further with help than on your own.
Solution
There are 3 kinds of people I want you to have around you.
Someone who needs your help, an accountability partner, and a mentor or coach.
Helping someone is one of the most fulfilling things you can do, also this highlights to yourself that you don’t know everything.
It is rewarding and humbling at the same time.
When I help others, like yourself, it opens my eyes to also see areas in my life when I need help.
Secondly, an accountability partner is the one who holds you accountable to your dreams and goals.
They have the right to challenge your perceptions and keep it real with you.
You need someone in your corner who keeps you on track to achieving your goals and keeps you from deviating into other things.
Finally, a mentor or coach. This is someone who is further than where you are and can pull you up to where you want to go.
Getting a mentor or coach is all about finding someone who’s been where you are so that they teach you how to overcome that situation.
If you need someone to hold your hand in the beginning find a coach that will do that with you.
You can have a mentor or a coach for being debt free, managing your money as a couple, or saving up towards buying a house.
When we have the right people around us encouraging and empowering us towards our personal goals we become more financially confident.
Take Action
If you don’t face that which destroys you, you will never be free from it.
Which of these money habits that keep you poor are you going to face first?
Whichever one it is, put the solution in place immediately.
Share this with your friend, family, or partner and find the right people to build around you to build your financial confidence.
Download our Free Financial Health Check to give you a good overview of your financial health.
Let us know how you’re getting along by getting in touch with us, we’d love to hear from you
Knowledge is powerless without action
So take action, and take care
Thando