Money is something that everyone ponders about. In fact, everyone is experts in financial management but only a few are a really good at it. There is this weird thing that happens to a lot of people, you have two individuals, of the same age with the same salary range, with an equal chance at success.
One of them amasses a ton of wealth, but the other remains poor all their lives.
Why?
Luck? Opportunity? Discipline?
The reason is that it rarely takes one instance to remain poor for life. It is a combination of both mental, emotional, and practical things that slowly, if not over time corrodes you financially to a point where you are financially crippled for life.
We decided to compile a list of those things. The following are habits that if we had developed early in life would have gotten us in better shape financially.
1. Living beyond your means
This is one of the easiest reasons to remain poor all your life and it is the hardest to change. It is very easy to overspend as a person.
You get your first paycheck, you want to treat yourself, maybe buy that phone, go out for better meals, watch a bit of lifestyle creep sink into your habits and before you know it, you’re indulging in these little buys every now and again.
For example, eating out during weekends, buying designer clothes.
Spending increases, so do your expenses, but income stays the same. Savings then become impossible and when there is no saving to begin with there is no capital to grow, no way to make your money work for you, and most of all there is no way to break free.
Fix: Monitor every expense like a hawk. Know every penny that is spent. This has become more possible in this century because of how digitalized everything has become.
Cut expenses and even then live BELOW your means. Living your means is still living within your means.
2. Having no financial goals
The worst that could happen to anyone is that they work so hard, day in and day out with no vision, with no financial goals.
The result? There are so many people out there that spend their hard-earned money on the little things they think are really important without minding that there are long-term goals.
Fix: Every year or every quarter, set a financial goal. A vision for your money.
“I want to raise $10,000 by next year”, “by next year I will invest 15% of my income every month”. The more specific you are, the more your money will have a purpose instead of it being frittered away at will.
3. Ignorance of financial education
Schools teach almost everything a person needs to be fully equipped with all the necessary skills in this life, except financial education.
In this age and time, we have people that have never bothered to build a habit of learning continuously.
What that means is that they don’t understand how compound interest works.
They mix up between assets and liabilities. They are financially fragile.
Fix: Continuous learning is the order of the day. Read on different subjects about budgeting, saving, investing and most of all, taxes and stay abreast of all the possible ways of being a better investor, learn more about financial education.
Follow financial educators and increase your wealth of knowledge because knowledge also compounds.
4. Living paycheck to paycheck
According to a study done, about 59% of Americans live paycheck to paycheck.
Now, one thing that is usually misconstrued is that the poor live paycheck to paycheck because they are usually paid in that amount, this is not necessarily true. They live paycheck to paycheck because they are very bad at managing their cash flow.
The result? Every single penny earned from that paycheck is spent. For people who live paycheck to paycheck, one unexpected bill is usually the end of the whole system.
Fix: Build an emergency fund.
To start with you can start small by $500, however, you can even get to about $10,000 so that should anything happen in between you have this fund to take you through.
The easiest way to build an emergency fund is by having a strict saving structure for a determined amount of time.
5. Fear of the market
To some people, the stock market is a gambling area, investment is scary because of lack of knowledge or because of the general negative experiences a few have experienced in the market.
The result is that the average Joe has been put off and prefers to just keep his money in the banks or just take it in cash where it can rot away slowly in the bank account.
Fix: Start small and grow. You don’t need thousands of dollars to start investing, not in the 21st century, at least.
6. Getting trapped in debt
Credit cards, “buy now pay later” schemes, car loans, and all of those big numbers that make it easy for one to spend way beyond their means, with minimal effort. That is modern-day financial.
Interest does not sleep. A few small unpaid bills and it begins to snowball in to years of repayment.
The cycle? It is not a lack of income that leaves people in perpetual poverty, it is a future income they can never earn.
Fix: Don’t get into high-interest debt. If you are, make a determined debt payment schedule and work your way up to it. The rule is always simple, if the debt is not an asset that earns an income, stay away.
7. Impatience
Patience is a virtue and is something that it takes years to master.
Wealth is also not built overnight. For many though, “investments” are pounced on way too soon.
Get rich quick schemes, meme stocks, wild speculative tokens.
When they go off, which they usually do, it leaves a scar and makes many more people believe that “investing doesn’t work”.
The thing is, compounding takes time and people have to realize that compounding also takes time.
The result? Many of the rich understand this, the broke don’t.
Fix: Steady growth. Think long-term. Plan in decades, not days. Small regular actions are better than making periodic financial downfalls every time.
8. Negative Money Mindset
Some people have been socialized to believe that money is the root of all evil, others just believe that rich people are too stingy, money-grubbing to even attempt to emulate their financial state.
The result? We have a very negative money mindset and we refuse to see this as the bottleneck to our financial success.
Fix: Reframe the way you look at money. Money is just a tool, an objective tool with no motive. The more you have the more options you have.
9. Surrounding themselves with toxic people
The people you keep around yourself are a direct reflection of your financial situation.
If you keep hanging around with people who love to spend, or complain about their finances, or who do not understand financial freedom, then it is only a matter of time before you pick these traits up.
For the financially blessed, they talk about more opportunities in the market, the poor people, they are always talking about the “what” and not the “how”.
Fix: Surround yourself with better people. Look for people that think better. Not necessarily people who are wiser in financial terms but those who understand financial discipline.
Money is very contagious.
10. Short-term vision
To most people, every financial decision made is made based on the present, on the short-term.
Every decision is made based on what seems to be the better one at the time.
It is about what “feels” right and not what is best for the future.
True wealth and abundance takes true delayed gratification and that is choosing to sacrifice a little today for a better future, by default.
Fix: Before making any major decision or purchase ask yourself if this will make your future self a better person. If it does then go ahead and if it doesn’t then you may need to take a second look.
Closing Thoughts
Remaining poor is not just about the lack of making money, it is the system, the habits and the lack of belief in oneself which if not fixed leads to financial derailment for many.
The easiest way to get started is by:
- Budgeting with care. Know your inflows and outflows.
- Save first, spend later. Build a determined savings schedule.
- Invest systematically. Automate your savings and have your investments be done automatically also.
- Learn constantly. Always build and add to your financial education.
- Live BELOW your means. Do not be tempted by life.
The funny thing about wealth, is that for most people, it is not about luck or privilege alone, it is about mental, financial and even emotional discipline that goes hand in hand with consistency.
Wealth is a matter of awareness. The truth is that most people stay poor for the simple reason that their system, habits and most of all their mindset is usually aligned towards a very short-term comfort.
Breaking this cycle takes ACTION.
The moment you begin to treat money like a tool for freedom rather than a reward for a hard day’s work is the beginning of a gradual reversal.
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