Bad Money Habits That Might Be Keeping You from Getting Rich

Many of us do not make enough money to have our own personal financial advisor. These men and women help individuals with investment opportunities and help to manage their money. Without help from an outside party, we tend to develop bad money habits. These habits can actually prevent us from getting rich, or at the very least, keep us from building an adequate savings. Here is a list of bad money habits you might be exhibiting, day to day. In looking at these bad habits, we can really focus on ways to break these habits, and begin the road to a rich future.

Setting and forgetting

When it comes to your savings rate, you could be losing out. Your savings rate should increase throughout your career. Every time that you get a pay raise, even if it is a small increase, your savings rate should also be raised. It is also smart to review any retirement accounts you might have, on a yearly basis. Rules and regulations change every year, and you want to make sure you are well balanced.

Spending too much on housing

The largest payment you probably pay monthly is your mortgage or rental payment. Budget advisors recommend that you spend 28% or less of your gross income on your housing payment. For those who own a home this includes the principle, interest, taxes, and insurance. This is why it is important to figure out the best location, before buying or renting. Sometimes a simple change, such as moving from the city to a suburb, can save you a lot of money on the price you are spending monthly for a home or rental. It is not always easy, but can allow you to save big bucks. For example, moving from a property that costs $1,200 a month to a place that costs $900, will save you $300 monthly. Multiply this number by twelve months in a year, and you have an extra $3,600 a year. This is money that can be put into savings or invested to help you get rich.

Excessive housing payments is one of the major causes of financial distress. When you need to make a housing or rent payment, and you find yourself short, you have few options as housing is not something you can really put off or go without. It’s the number one reason people go to title loans Chicago, or get other high-interest rate loans.

Not taking full advantage of work tax benefits

There are companies that offer 401(k)’s, health saving accounts, and commuter funds. These all use pre-tax dollars, which can help reduce your top-line income. You end up in a different tax bracket and pay less in taxes overall. Sometimes even health insurance can help you to save money. If your place of employment only pays 25% into the cost of health insurance, you are paying 75%. Although it seems like a lot, this might be the cheapest option, especially if you have a family, compared to paying for private health insurance. The money you pay towards health insurance is taken out before taxes, which can put you in a different tax bracket, allowing you to pay less in taxes.

Being overly conservative when it comes to investing

You should become conservative with your investments when you are around retirement age. Before that, try not to be too conservative and be sure to play 100% into equities. This allows for larger, long term gain, which is great when trying to get extra money.

Impulse shopping

A lot of us have fallen victim to impulse shopping. We see something we like and have to buy it right away. Whether it be a small, inexpensive item, or a high end item, wait it out. If you wait a day and sleep on it, chances are you will wake up with a new feeling. Many impulse purchases are ones that you do not actually need. Even just going to look at new cars because cars are your hobby can lead to an amazing sales person drawing you in to purchase a new vehicle. They might offer you the best reasons in the world for buying a new vehicle, but don’t let their opinion influence you just yet. Make sure to go home, sit down, and come up with a financial plan as whether this is a worthwhile investment. A majority of the time, you will realize that impulse buy is not worth it.

Paying too many bank fees

Be cautious, careful, and informed when it comes to your bank account. A one-time fee won’t exactly put you in debt, but when fees add up, you lose out on money. Make sure you are aware of the type of overdraft protection offered at your banking location. Overdraft fees add up, and are easy to accumulate. If you do not pay attention to items posting in your checking account, you could easily overdraft, and pay extra money for these fees.

Be careful with credit cards

Make sure that when you spend money on a credit card, you try to pay back the full amount. Sometimes this can be hard, especially when personal disasters strike, but paying back the minimum will only cost you more. When you are only paying the minimum, you end up paying back more in interest over a period of time. This can cost you hundreds of extra dollars, in a years’ time.

 

Of course many of these tips will not actually make you rich. They are basic, bad money habits and everyone displays one or more of these habits on a daily basis. In acknowledging these bad habits, and creating solutions for them, even if they might seem to save only a minimal amount of money, understand that you are still saving money overall. Eliminating bad money habits early will prove you with the extra money needed to try and get rich.