Are you having trouble getting ahead with your finances? If you’ve answered yes to this question, you may have some bad money habits that keep you poor.
The good news is that once you identify these habits, you can make the changes necessary to break the cycle and get on the path to success.
At the end of this post, you’ll have a workable plan you can implement to change your situation for the better.
10 Money Habits That Keep You Poor
There are many habits that keep you broke, but we’re going to focus on the 10 most common habits here.
You may identify with one or several of these habits. The important thing is that you take an honest look at yourself and your circumstances, so that you can correct any of the issues that pertain to your situation.
I know there were times in my life when I feel into some of these traps. It wasn’t until I recognized what was happening that I was able to turn things around.
I have no doubt you will be able to do the same and begin winning with money in no time at all!
1. Never Investing Time in Financial Education
Most students aren’t given a financial education in high school. As a result, you may simply lack the knowledge that leads to success.
I’m big on always learning new things. Fortunately, we live in a day and age where knowledge is easily accessible.
You can visit your local library to get print books on everything from creating a budget to investing in the stock market.
There are also endless videos available on YouTube. If you have the means, you can even sign up for a course or two and learn from an expert.
The important thing is that you schedule in some time each week or two to increase your financial education.
2. Not Using Credit Cards Properly
Credit Cards are an excellent tool when they are used correctly. You should never make any purchases on a credit card unless you have the money to pay them off at the end of the month.
Additionally, many use their credit cards to earn rewards. I have a Chase card that I use to rack up free dollars to use on Amazon.
If you make purchases that you don’t need in order to get more rewards, however, you’re spending more than you are getting back. That habit will make you go broke.
Instead, only make purchases on your credit card that you would normally make anyway. For example, I use my credit card to make grocery purchases and to pay my health insurance premium.
Then at the end of the month, I pay off my balance in total.
3. Making Purchases Simply Because You Have Extra Cash
There are times when you may come into a little extra money. For example, you may get a bonus at work or some Christmas cash from the relatives.
One of the spending habits that keep you poor is making purchases that you really don’t need just because you have a few extra dollars.
Instead of wasting the money, consider how you can put it to good use. Add it to your emergency fund or invest it in an index fund.
4. Blindly Following the Advice of Others
While most people have good intentions, you should never blindly take financial advice from anyone.
If someone offers you an opinion on what you should do with your money, you’ll want to first determine whether that individual themselves is successful.
Never take advice from someone who is in debt and not managing their own funds correctly.
Look for someone who has already achieved success. That shows they know how to put their money to good use.
You’ll also want to consider the individual’s situation, as a successful single individual won’t follow the same strategies as a married couple and vice versa.
5. Not Having a Working Budget
When you don’t take the time to create a budget, you can’t accurately see where all of your money is going.
A budget presents a clear picture of your income and expenses, so that you can create a plan to make your money work for you.
Without a budget it’s easy to fall into the trap of spending more than you make, leaving nothing left over for savings or retirement.
Budgeting doesn’t have to be scary or hard. There are many Budgeting Worksheets on the market that you can use. Simply add your figures in the correct boxes.
Don’t forget to review and update the budget regularly, as income, expenses and needs change over time.
6. Not Paying Yourself First
When you don’t take a portion of your paycheck out to save or invest, you never give yourself a chance to get ahead.
After I tithe on my income, the first thing I do is pay myself 10%. Since my savings account is fully funded, I put this toward my investment accounts.
I create a budget (as mentioned above) for the remaining income.
If you find that you are not in a position to pay yourself 10%, start with 1% and work your way up to at least 10%.
Eventually, savings will become a good habit and you won’t even have to think about it, you’ll just do it.
7. Trying to Keep Up With the Joneses
Most people don’t become successful by purchasing the latest cellphone, designer bags or gourmet restaurant meals.
Don’t worry about what your neighbors or peers are spending their money on. Focusing on more stuff will only leave you broke and poor.
Change those bad habits that keep you broke. Find good deals on the items that you need (not items you want).
My daughter has a wardrobe made up entirely of Justice clothing. I didn’t pay full price for a single item. I got the outfits during big seasonal sales and from eBay. She also had gift cards from birthday and Christmas.
The important thing is that you live within your means and that you don’t make a purchase simply because someone else has the latest shiny toy.
8. Not Keeping an Eye on Your Credit Report
Your credit score is used more often than you think, so you’ll want to keep an eye on it. Landlords, banks and loan agents will all make decisions based on your credit score.
Credit scores may also have errors, which you’ll want to have corrected as soon as possible. In some cases, the report may even reveal identity theft that you were not aware of.
If your credit score isn’t in the excellent range, you can make a plan to increase your score.
Consider Reading: 5 Ways to Improve Your Credit Score Fast
Every individual is entitled to one free credit report per year from each of the three major credit reporting agencies.
9. Relying on One Source of Income
There’s a reason the saying “Don’t put all your eggs in one basket” has become so popular.
When you have one income source, you risk losing everything if something happens, such as job cuts or a company going out of business.
Creating at least a second stream of income ensures that you have some money coming in while you work on a plan to replace the lost income.
I myself have five main sources of income (and several smaller ones I’m building up).
You don’t have to get a full-time second job if you don’t have the time. There are many side hustles that pay well.
You can also start your own business. I highly recommend Wealthy Affiliate for this, as it works with any niche or passion to generate a passive income.
10. Failing to Create a Long-Term Plan
A budget helps you get a handle on the money you have to work with right now, but without a long-term plan, you won’t know how to reach your end goals.
Your financial plan should not only list your long-term goals, but also the path to achieve those goals.
It should include realistic numbers, such as how much you expect to earn per year from your investments.
Don’t forget to figure just how much money you need to retire. MSN Money has a retirement calculator that you can use for this.
That figure will help you create your long-term financial plan.
Bad Habit Money Examples
In addition to the money habits that keep you poor listed above, here are a few more bad habit money examples.
- Purchasing cheap products that break or don’t work soon after you buy them. You may think you’re saving money on that refurbished laptop until it starts glitching six months later. When it comes to certain items, like electronics and appliances, it’s better to spend a few extra dollars upfront for a quality item that will last.
- Not saving up for larger purchases. Hearing that you need a new heating system hurts if you don’t already have the money saved up for it. Don’t forget to go through the average life of the big ticket items in your house (roof, heating system, refrigerator, etc.) and then budget for replacements over that time span.
- Neglecting investing money toward retirement. Investing can be intimidating to many, but the subject should not be avoided because of a lack of knowledge. Seek education or the assistance of a financial advisor and make retirement savings a priority.
- Paying your bills late. Not only is paying bills late a bad habit, it greatly affects a person’s credit score. A bad credit score leads to higher interest rates when seeking loans, and may even lead to the rejection of the loan altogether.
What Are Five Good Money Habits?
Getting rid of bad money habits that keep you poor, you must replace them with good money habits that will make you wealthy.
Here are my top five recommendations:
1. Read a Financial Book Each Week
It has been reported that one thing all millionaires have in common is that they read. Commit to reading one financial book each week.
If you don’t like to read, go with an audio book instead.
You can borrow free books from the library, which is best if you don’t have the money to purchase new books in your budget.
2. Challenge Yourself to Save
If saving doesn’t come naturally, but you have a competitive spirit, create a savings challenge for yourself.
You can challenge yourself to set aside the cost of a cup of coffee per day or save $5 each day for an entire month.
Should you be looking for inspiration, I recommend these savings challenge printables:
Do you like playing games? How about challenging yourself with a game of Saveopoly!
3. Check Insurance Rates Yearly
While most individuals shop for the best insurance rates when choosing their initial policy, many neglect to repeat this process when their policy is up for renewal.
I can’t tell you how many times I got a great rate, only for that rate to be increased significantly upon renewal.
After making a few calls, I was able to find a better policy for less. In fact, my daughter saved $400 on her car insurance doing this and that was even with an increase in coverage that was required by her new job.
I recommend checking your homeowner’s, auto, and any other policies that you may have.
4. Build an Investment Portfolio
Once you have your emergency savings account funded and a savings account that would cover at least 3 months of expenses, put your money toward investments.
Fund retirement accounts first, as these have tax advantages.
Afterward, you can move on to other investments. Make sure you are consistent.
It’s also important to note that your investment portfolio doesn’t have to be made up solely of stocks, bonds, and mutual funds. You can also make other investments, such as real estate.
5. Review Your Goals and Budget Monthly
Life is ever evolving, which is why it’s important to create a date each month when you can sit down and review your goals and current budget.
Perhaps you just found out you’re expecting. In that case, you’ll need to add a category to the budget for baby.
Maybe you got a promotion at work with an increase in pay. In that case, you’ll need to create a plan for the extra income.
Changes are to be expected, so embrace them by adjusting your current goals and budget.
In Conclusion: Money Habits Keeping You Broke
Everyone has the power to break their bad habits and replace them with new habits that produce more positive results.
Begin your journey with a positive attitude and tell yourself “I can do this!” Get an accountability partner if you need.
It may seem hard to get started, but if you preserve, you’ll find renewed energy once you begin to see all the progress you’re making.
Which habit do you need the most help with? Let us know in the comments below.