7 Financial Habits That Will Keep You Broke
Are you continually facing financial challenges? You might be keeping yourself broke and living paycheck to paycheck with habits you didn’t even realize were contributing to your situation. Dropping the habits that are keeping you broke is an effective first step toward enhancing your security and financial future.
Make the decision to drop these financial habits from your life:
- Failure to create an adequate emergency fund. There’s no better prevention for financial disaster than an emergency fund that covers at least 3 months of living expenses. A short period of unemployment or a single, unexpected, major bill can be financially devastating. It will Avoid believing it’s a matter of “if it ever happens.”
- Set aside whatever dollar amount you can manage and begin building an emergency fund. Even a few dollars each week is a start.
- Buying a Brand New Car – Especially When Financed. In speaking w/a fellow VIP cigar member of Casa De Monteristo who is in the car wholesaling business, your dream car can be purchased several years later when a majority of the depreciation (or retail value) has reduced the total car price. The reality is what you will owe on a brand new car will be almost triple of what the car will be worth. So why not make such a major purchase when you can get it cheaper? The way cars are made today you can find your car with miles already on it with a warranty still in place from the original owner.
- Next to a mortgage/rent payment, this is usually the second largest bill in most family budgets. Looking to reduce or eliminate this monthly payment will allow you more freedom and latitude to take of opportunities down the road.
- Consider starting off with a used car (that is brand new to you!) that you can pay cash for. There are plenty of “dream cars” that are plenty useful, dependable and aesthetically pleasing between $5-10k vs. the same car brand new off the lot at $25-50k.
- Use this New Car vs. Used Car Calculator from Bankrate. Hope this will help you with the actual numbers to help you see the numbers behind developing new financial habits when it comes to this large purchase. It can either set you further ahead or much further behind. See for yourself!
- Inappropriate use of credit cards. Using credit cards to purchase unnecessary items you can’t afford is the worst use. Putting charges on your cards up to their limits and then only paying the minimum due will put you in a precarious position, lower your credit score, and keep you in debt for a long time. My harsh lesson to this was in raising my kids purchasing diapers, groceries, fast food and gas on multiple credit cards, even if things were on sale. I eroded my discounted purchases by the 15% interest I paid when I did not pay off the full balance each month.
- Resolve to limit credit card use to emergencies or to accumulate rewards if you’re paying off your balance in-full each month. A credit card is NOT an emergency fund.
- Failing to save money from each paycheck. If you’re struggling to make ends meet, saving money often seems impossible. But this is the time it’s most critical. Begin a savings habit with just 5% of your take-home pay and build from there. If you never save any money, how will your situation change? Ask yourself, “Will setting aside $50 a paycheck, $100 a paycheck or $200 a paycheck really hurt me?” What helped me begin this habit while serving in the U.S. Marine Corps is setting up an allotment to my savings account so my take home paycheck direct deposited into my checking would not have this money for me to spend.
- Making impulse purchases. How many times have you made a big purchase and then run out of money at the end of the month? Impulse purchases are rarely satisfying after the initial glow has worn off. In fact, you’re probably resentful of the purchase after the financial pain comes home to roost.
- Take a few days to think about the purchase before making a final decision. Shop around on the Internet to see if you can find a cheaper price. For my fellow Best Buy junkies out there, ask the salesperson if there is the same product hidden away for sale called “Open Box” item that may have a decent percentage taken off normal retail price. Going through this process, you’ll often find the urge has subsided.
- Buying items you don’t need. After shelter, clothing, food, and medical care, most spending is optional to varying degrees. You probably don’t want to feel like you’re living in a cave and eating Top Ramen noodles and chicharon, but you certainly spend money each month that could either be saved or spent more wisely.
- Failing to contribute to your retirement. After forty years of toiling to make ends meet, wouldn’t it be nice to retire comfortably? Many seniors find themselves in challenging financial circumstances because they failed to contribute adequately to their retirement. It’s never too late to start nor is it ever too early to being. Allow money to serve YOU and allow you to eventually collect interest, instead of paying it.
Eliminating negative financial habits is the most effective way to start your journey to financial abundance. Choose one habit and make an effort each day to remove it from your life. The most powerful action you can take with regards to your finances is to eliminate your three most debilitating financial habits.
Here’s How You Can Improve Your Financial Habits
Would you like to join a community of people that meet weekly to help you improve your financial IQ and education? Would you like to take a number of your monthly “expenses” and discover ways to make them tax deductible, free up cash flow and quickly reverse your financial situation? Would you like to develop habits of the wealthy, one step at a time?