How would you know if you have bad habits that are keeping you poor or sabotaging your financial future? Sometimes the people closest to us give us advice, feedback and tips on how to be better. In fact, independently, we are all capable of seeing our own weaknesses if we take the time to observe the things we do day-to-day. Let’s say you know what your bad financial habits are but you don’t know how to fix them. The best thing to do is to become a master of your own psychology to improve your life. Therefore, I will talk about these financial bad habits and give some suggestions that can help bring positive improvements to your life.
Here are some common financial bad habits to change to have a better lifestyle:
Avoiding financial education: Lack of Education and Knowledge. In this life as a human, financial education is crucial. Every single one of us must know basic math: addition, subtraction, multiplication, and division. From there, we can learn all these financial business terms and break them down into something less complicated and easily understood by everyone. I am aware, however, that many people don’t want to learn about finances for various reasons: It’s too hard, they don’t understand it, they don’t know anyone that can teach them, they don’t have the time, they don’t have the money for classes or courses, etc. What I am about to say may sound harsh but I know you can handle it: Where there is a will, there is a way. If you want to improve your life, that is the will. I am here to tell you there is a way. If managing your own money is something you don’t want to do, you can hire someone to do it for you. If you don’t have the money to hire someone, you must do it yourself. Don’t forget, majority of us are out here doing it ourselves. If finances aren’t your strength, make a goal to start earning enough money to pay someone else to do it in the future. But if you don’t have the money for that yet, you’ll have to do it yourself just like the rest of us. Thankfully, it’s easy to find the information online that you’ll need to know and it’s often FREE! I have my own free financial course for you to watch, I offer 1-on-1 private consultations at a low cost to help you personally and a detailed website full of resources and other free materials to help you. The help is out there for you, but you have to do your part! This is the bare minimum that you must do for yourself. It’s your life and I know you want to succeed. I want you to succeed!
Suggestion: Schedule a weekend or some time alone to educate yourself about personal finances and honor that promise to yourself to get your financial shit together!
Living beyond your means: This is pretty self-explanatory. Simply said, you don’t earn enough money to support the lavish lifestyle you see in your head. In your mind you might think, “I have a job and I have a credit card so I can afford this.” When in reality, you can’t. This is a symptom of consumerism and capitalism. Many people don’t stop to think how they will pay off the item that they couldn’t afford. There isn’t a plan. Because there isn’t a plan, debt comes into the picture and man is it ugly. You are in a mental battle between wants vs. needs. It is your responsibility to know the difference between the two. If you are living beyond your means, there is a high chance that you are buying products and services based on desire (what you want) and not what you need. If you are living beyond your means because you are not earning enough money to pay your needs, this is different and requires a new approach (Ex: finding a higher paying position, getting food from food banks and cloths from thrift stores, etc.). Suggestion: Make list of your financial goals, wants vs. needs. Focus on the items that lead you towards your goals (needs first, wants second). Budgeting and planning can help you avoid living beyond your means.
Impulse buying: This is when you see something and you buy it without thinking about the financial consequences (good or bad). There is a healthy way to impulse buy and there is an unhealthy way. The unhealthy impulse buyer tends to shop emotionally, lacks a plan, and might experience regret (buyer’s remorse) and financial distress later. The healthy impulse buyer tends to be secure, has a budget in place for impulse shopping, and feels a sense of satisfaction for the purchase because they don’t need to worry about their impulse ruining their financial goals.
Suggestion: There is a 1% Threshold rule for impulse shopping that has been used to manage impulse buying. Basically, you should only spend 1% of your net income on impulse buys. Example: Your net income after tax is $40,000 per year. $40,000 x .01= $400. This means you can only spend $400 every year on an impulse buy. Here are 2 ideas you can try as an impulse buyer: 1. Write a note to yourself describing how terrible you feel after an impulse purchase and put it in your wallet where it is easily visible. 2. You can even have a separate category in your bank account that is specifically for impulse buys. Just make sure the money is subtracted from the impulse buy category whenever you spend that money. For more information, you can listen to Glen James from ‘My Millennial Money Podcast’ in Australia, and hear more details about this Threshold rule and its origins.
Accruing constant debt: Similar to living above your means, debt happens when we don’t have the financial resources to get what we need. Some debt is healthy when it is managed well. However, most people in debt aren’t usually managing the debt in a healthy way. Maxing out different credit cards is one of the fastest ways of accruing debt. Purchasing homes with the intention of renting them out can also lead to debt if not planned well.
Suggestion: Only buy what you can afford from your checking account on debit. Stay on budget. If you need financial assistance, there are organizations that can help you. I will list some organizations that offer assistance. Check your state’s Department of Economic Security (Ex: https://des.az.gov/ca), Money Fit, USA.gov, CISA.gov, Charities, Treasury.gov, Pan Foundation (for health), Hopelink, DHS.gov, etc.
Lack of a savings plan: It is important to save. Saving and spending are a team like the sun and the moon: You can’t have one without the other. We need to spend money on food but we also need to save money for emergencies.
Suggestion: Try a simple Budget plan to help you plan your budget and savings. For example, you can take your net income and apply it to one of the Budget Rules: 50% of your budget goes to your needs, 30% of your budget goes to your wants, and 20% of your budget goes to savings.
Gambling: Gambling can be a healthy hobby when the person has the financial resources, the self-control and self-discipline to understand when to stop. As the old saying goes: Too much of a good thing is a bad thing. Everything in moderation. Suggestion: For those that don’t have the resources to gamble, I’d advise against gambling (including the lottery, casinos, horse racing etc.). For the people that do have the resources to gamble, I’d recommend having a gambling budget as if it were a hobby. Similar to the 1% Threshold rule for impulse buying, only spend about 1% (or even lower) of your monthly “fun budget” on gambling.
Consumerism: By definition, consumerism is a social theory that encourages people to buy more goods and services than they need for survival/status. All over the world, consumerism plays a role in personal finances. Marketing and mass media do a great job at promoting products we don’t really need. There are marketing research departments designed to learn things about us and our habits (cookies, anyone?). Not all marketing is bad but when a marketing campaign is designed, more or less, to hypnotize you into believing you need something when you don’t, it’s your responsibility to be able to snap yourself out of that illusion and evaluate if you truly need what they are selling or not. Such consumptions can take the form of: buying unnecessary subscriptions (Insurance, Car, TV, internet, Music, Magazines, Alcohol, Grocery, Cell phone, etc.), excessive eating out (going to restaurants or cafés for everything you eat), impulse buying (immediately buying something without a plan after you’ve seen an advertisement), etc.
Suggestion: Think twice before buying something and wait 48-72 hours before making a decision. While you wait, ask yourself a few probing questions to understand why you wanted to buy it and dig deep! For example: Is it necessary? Have I lived without it? Can I live without it? Can I afford it right now? Am I doing this for myself or to fit someone else’s expectations? Why do I really want to buy this? Have I researched and explored alternatives yet? Is there a more affordable way for me to get this instead? Does it align with my financial goals?
Gullibility towards scams: There are lots of scams out there and the scammers keep improving their scams. In the same way we need to educate ourselves on personal financial literacy, we also need to be vigilant to avoid scams.
Suggestion: Do not respond to emails you don’t know. Do not answer texts from people you don’t know. Do not give your financial information to a company that has no history. Check reviews and company longevity online to avoid being scammed by bot reviews/bot customers. Do your research online. If you Google the email address, company name or phone number, there might be a Reddit/Quora/Google forum (or equivalent) of many people describing the scam. When in doubt, go without! Stay safe out there everyone!
Perfectionism trap: This happens when a person wants to live up to an ideal; be perfect in the eyes of others. This roots from the fear of being judged, unwelcomed, and disliked by others. So to avoid being judged, this perfectionist feels the need to meet the spoken and/or unspoken social expectations. Therefore the perfectionist trap begins and the unnecessary spending starts. Some causes of the perfectionism trap can be from peer influence, pressure from others, negative self-criticism, and social media. Symptoms are sometimes, stress, anxiety, depression and a lack or the diminishing of self-worth and self-esteem. These have been linked to eating disorders, social phobias and PTSD. Peer pressure/ Keeping up with the Jones’/ social expectations. Suggestion: Ask yourself: Is trying to keep up with the social expectations of others bringing unnecessary drama and problems into my personal and financial life? Is it smart to put myself in debt for a social trend knowing that 1.) I don’t have the money for it and 2.) Trends are here today and gone tomorrow? Many people have lost sight of reality. If you don’t have the money to buy something, you really don’t have the money buy something. Therefore, whatever it is that you are interested in buying must wait. And if you suffer from impulse buying, wait 48-72hrs and ask yourself if you could live without it.
Procrastination: For some, procrastination has been the enemy of financial growth and progress. Things you need to get done suddenly feel so big and overwhelming. That crippling feeling tends to give anxiety towards tasks that would otherwise be easy but because of procrastination, it’s no longer 1 task you need to do, it’s 50. Therefore, you put it off…..again.
Suggestion: Start small. Really small. Find a comfortable place that you know you get work done. Environment is important. While in that place, make a small list starting with only 1 doable task. Give yourself a deadline to get it done. Once that 1 task is finished, cross it off the list and add another task to the list. Repeat the process. If you’re consistent about making changes to your life, you should see many tasks crossed off on that list within a month. If you can start small with 3 tasks, start small with 3 tasks. The point is to limit the amount of decisions you have to make each day because decision making takes a lot of mental energy. Having a doable daily routine is important when building new habits and breaking old ones.
As you are trying to stop your bad habits, I would like to remind you to celebrate your victories regardless of how small they may seem. Don’t beat yourself up over the failures either. Every single human in this world is experiencing difficulties of similar degrees. Think about it. No one is a perfect beginner or a perfect expert. Look at the bigger picture and give yourself a pat on the back for trying and doing a good job. Your wins are positive and worthy of your celebration! Practicing gratitude helps you stay humble and gives you perspective while working towards your goals. Whatever is within in your means for you to give yourself love, that is what you should do to treat yourself whenever you have a success.
Taking care of our mental health in between the wins and the losses is so important for our continued growth. Reward yourself for the effort you put into something that failed (Ex: a bubble bath, reading a book, etc.). Try not to lament in the negative feeling of loss or failure. Every human on earth fails many times in their lifetime. It’s natural. Manage what you are exposing yourself to (e.g. Are you watching too much TV or social media that makes you believe you are missing something in your life? -OR- Are you exposing yourself to things that validate your achievements and hard work?). Switch your focus to learn from the failures, the mistakes, revise the plan and try again.
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