Money Habits Keeping People Poor – Have you ever wondered why your journey to wealth isn’t progressing as you hoped? In this article, you will discover the money habits that hinder you from becoming rich and building true wealth. You will also receive valuable tips on how to break these limiting money habits and start creating the wealth you desire.
In the pursuit of financial success (like we all do every day), it is often very easy to focus only on the big picture, that’s the big things we need to do to get rich, such as investing in the stock market, real estate, and starting a business. However, the small habits that keep people from building wealth are important to understand because achieving success in your investments in the stock market, real estate, or a business largely depends on those small money habits that lead to big results.
By identifying and changing those limiting money habits, you can pave your path to financial freedom and wealth creation.
Procrastination
The one limiting money habit you should be mindful of is Procrastination. Procrastination is a silent enemy when it comes to building wealth. It is that voice that makes you not save for your growth fund or your retirement and delay investments or ignore debts.
You would hear something like: “You worked hard for your money, so you can spend it as you want. Investing can wait for the next paycheck, but you may not see this item to buy next time at this deal”. Procrastination will make you feel ok for not doing anything and even help you justify your inaction with reasons that may appear convincing. These inactions can have long-term consequences.
Pro Tip
What do I mean by action-based goals?
To defeat this silent enemy of wealth called procrastination, you need to set specific, action-based financial goals and assign deadlines to them.
Instead of saying: My goal is to have $10,000 in savings in the next 6 months, say instead: I will save $835 every two weeks from my paycheck so that after 6 months, I will have saved $10,000.
This will help you hold yourself accountable to save every paycheck. The earlier you start planning for your financial future and taking action toward it, the better off you’ll be.
If you need a resource to set your action-based goals and hold yourself accountable to take action, you can download our Free Goal Mastery Guide. It also has a visualization exercise and prompts to guide you in this journey.
Living Beyond Your Means to Impress Others
One of the most common money habits that prevent people from accumulating wealth is living beyond their means, especially to impress others. It’s tempting to keep up with the Joneses, but this can lead to a cycle of debt that’s hard to break.
Living to impress others by overspending on luxury items or unnecessary subscriptions can quickly drain your finances. What happens, in this case, is that because there is always something good to spend money on, you continuously spend your money keeping up with the Joneses instead of investing your money in assets that make you more money.
Pro Tip
Pay yourself first before anything else. It’s ok to spend your money as you want because you worked for it. In fact, it’s ok to spend on looking good and having fun. But, here is the caveat: you should pay yourself first before spending on these things, not the other way round.
This means putting some money away to fund your growth fund and your emergency fund before you spend the rest of your income.
Fund Your Growth Fund (FYGF) is setting money aside specifically for investing in assets that make you more money and create wealth for you, such as investing in yourself, stocks, real estate, business, and any other assets that make you money. Your emergency fund is what it is, for emergencies. You should not use your emergency fund for investing. You invest the money in your growth fund.
I recommend allocating 10% of your income to your growth fund and another 10% to your emergency fund until your emergency fund grows to where you want it to be; then, you can scale back and put more money into your growth fund.
Ignoring Financial Education
Another money habit keeping you from becoming rich is Ignoring Financial Education
A lot of people do not believe they need financial education. They believe that you should just give them the money, and they know what to do with it. This is a poor man’s mentality.
People who create sustainable wealth spend their time and money learning about how money works and continuously getting financial education around different wealth-building principles. This is what gives them the skillset, mindset, and toolset to create sustainable wealth.
Many people find themselves in difficult financial situations simply because they lack knowledge about money and how to make it work for them. Whether it’s understanding how to invest, the importance of credit scores, or the basics of budgeting, a lack of financial knowledge can keep you from making informed decisions.
Pro Tip
Invest time in educating yourself about personal finance. Read books, take online courses, or attend workshops that focus on money management, investing, taxes, and even economic policies and how they affect consumer finances.
Knowledge is power, and power enables wealth creation.
Ignoring Debt
Another money habit keeping you from wealth is Ignoring Debt
Debt can be a significant pathway to wealth and can also be a barrier to wealth accumulation. Many people do not view debt as a beneficial tool for building wealth, either due to a lack of knowledge or simply because of ignorance. Some carry credit card debt or loans without a clear repayment plan.
So, ignoring debt can lead to increased interest payments and financial stress. It can be a source of income depletion and keep you from becoming rich and achieving financial well-being.
Ignoring debt can also hinder you from taking advantage of good debts as a source of investment capital that can boost your wealth accumulation process.
Pro Tip
Make a plan to tackle your debt. Consider using the snowball method (which is paying off the smallest debts first) or the avalanche method (paying off the highest-interest debts first). Whichever method you choose, do it and be intentional. It’s all about taking proactive steps to reduce your debt load.
As you tackle your existing debt, you are setting yourself up for a good credit rating that will allow you to take advantage of good debts for investing and building wealth.
Relying Solely on One Income Source
In today’s ever-changing economy, relying solely on a single income can be risky. Job security is not guaranteed, and having multiple income streams can provide a safety net and accelerate wealth building.
Pro Tip
Explore passive income opportunities or side hustles that align with your skills and interests. Whether it’s freelancing, investing in the stock market or real estate, or starting an online business, diversifying your income can boost your financial stability and help you create wealth.
Emotional Spending
Many people turn to shopping as a way of coping with stress, boredom, or other emotions. This emotional spending can lead to regret after the fact! It’s like crying over a spilled milk.
Emotional spending can lead to financial strain because you are spending your money on things you don’t need. It hinders your ability to save and invest to create wealth.
Pro Tip
Identify triggers that lead to emotional spending and find healthier alternatives to cope. Whether it’s exercising, reading, or spending time with friends or family, find activities that fulfill you without impacting your finances.
Final Thoughts
Breaking free from the money habits that keep you from becoming rich is not just about changing behaviors; it’s about fostering a wealthy mindset. When you recognize and address these limiting habits, you can take control of your financial future and build wealth.
Remember, the journey to wealth is a marathon, not a sprint. Start small, stay consistent, and watch your financial landscape transform. Your path to richness is within reach!
