10 bad financial habits that keep you poor
What are the BAD FINANCIAL HABITS that keep you poor. Well not exactly poor, it does not allow you to break out of being middle class. Let me look at a few of the things that I have observed:
Having no financial goals – when there is no goal for which you are saving or investing, chances are you will not save or invest! It is really important to have goals – whether in health or wealth. The rich and those really wanting to reach there have clear goals.
Paying yourself last – when you earn money on a regular basis (mostly monthly), if you first spend on your needs and luxuries, you will never have enough investments. The rich stick to the principle of ‘Pay yourself first’ – first pay and allocate the money for all your goals, and thus you will have savings.
Getting comfortable with debt – borrowing to pay for sudden expenses – a broken windshield, or an inflated electricity bill or a doctor’s bills. Once you get comfortable with debt you don’t worry about borrowing. When you are told only the instalments the loan looks small. Such people buy everything in instalments – EMI for travel, and even expensive phones! The interest paid to the banks keeps you poor!
Not having Emergency funds – when they need some money, they just dip into the bank account and take a loan! This leads to borrowing and they feel justified when they have, say a medical emergency.
Not having a hang of one’s expenses, income, assets, liabilities. When you do not have goals (destination), you have no path and have no accounting. This also means they have no accountability to themselves. This really keeps you poor. The rich track their assets, liabilities, income and expenses! Most importantly they monitor their Net Worth on a regular basis.
Habits which I see as ‘expensive’ – planning last minute trips and paying top dollar for air tickets, staying in expensive hotels when on vacation, using private transport for every move!
They don’t bother much about calculating how expensive it is to travel by private transport!
Regularly eating out, buying branded goods, using expensive modes of transport, - these are luxuries. Travel is a necessity but travel in luxury is keeping you poor.
Poor asset allocation! – most of the money (if any) would be lying in the bank without being invested, in this case there is no investment made or it is made at a much later date – which is postponed indefinitely.
Poor understanding of taxation – when you do not know that capital gains is taxed at a lower rate than regular income! This is for people who have some money. The real rich people understand investing, and taxation -as applicable to your earned income and investment income.
Not understanding basic Personal Finance – goals, budgets, monitoring, renting vs buying, buying too big a house or a luxury car, are all crippling actions which keep you poor!