Stop Being Poor: 6 Things Poor People Do That Rich Don't (with fixes)

those little things they become habits they can have a tremendous impact on your bank account. Without a budget it is so easy to overspend. With an app you can categorize and analyze all of your spending. Allocate savings or investments before you pay any other expense. Ignoring this principle has major implications like living paycheck to paycheck. Getting comfortable with bad debt, it's become the norm. These companies want you to be bad with your finances. If you can't afford to put the purchase on your debit card, don't turn to the credit card.

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Hey everyone, welcome back to We're Talking Money. If you're new here, I'm Phil Clark, your host, and today we're diving into a very important topic that can literally make or break your financial future.

In a recent show we focused on seven frugal habits of people who always have money. Those seven things are budgeting and tracking expense, living below your means, always having an emergency fund, avoiding unnecessary debt, developing frugal shopping habits, planning for the future, mindful spending, which is knowing the difference between required expense and desired expense.

In this show we're doing somewhat of a sequel. We're going to focus on six careless habits that are definitely going to keep you poor. Those little things, sometimes you don't even realize you're doing them. They become habits and they can have a tremendous impact on your bank account. I'm also going to share some practical solutions so that you can get this under control. We're going to do this as soon as you hit that thumbs up button. Perfect. All right, let's get started.

So the first careless habit that we're going to talk about is ignoring a budget. Now a lot of people think that budgets are boring or even restrictive, but they're not. They're actually an incredibly good tool that can help you make better decisions with your money. Without a budget it is so easy to overspend on things that you probably don't need. It's also very easy to under save in things like your nest egg for retirement.

So how can we fix this? Well, you can start by tracking all of your expenses for a full month. Using an app can make this a lot easier. Maybe something like Credit Karma is a good place to start. With an app you can categorize and analyze all of your spending. You're ready to set realistic goals and you've got to stick to them. Without question, not using a budget creates a lot of blind spots.

Now careless habit number two, it's not paying yourself first. You allocate savings or investments before you pay any other expense. I probably don't have to tell you that ignoring this principle has major implications like living paycheck to paycheck. People that pay themselves last, they rarely have anything left at the end of each month to save. Everything gets spent.

The key to fixing this common bad habit is setting aside a fixed amount every paycheck. Start with, say, 10%. You might be saying, that's impossible, I don't have 10% to set aside. Get back to that budget. Once you have that clearly defined, you can begin to easily see those desired expenses. Try trimming a few of those. I think you'll find that 10% pretty easily.

That brings us to careless habit number three, and that is lifestyle inflation, and this one is happening more and more. We also call it lifestyle creep. It's a result of increasing your lifestyle just because you get a raise or a bonus. This can lead to that paycheck to paycheck kind of lifestyle.

One of the culprits to this kind of carelessness is expensive hobbies. For example, I love to play golf. Maybe you do. Golf is a very expensive hobby, and over the years I've learned it cost a lot more to play golf than simply buying some clubs and, say, a dozen balls. You might have membership to the country club, you might have food and drink cost, there's green fees, and if you ride a cart you got to pay for that. It adds up very quickly, and if you're playing a few times a month there's a lot of money going out the door, and that's just one hobby.

Well, here's what people that always have money tend to do. They set financial goals. You could set a goal to accumulate a certain amount of money over the course of, say, two or 3 years. Avoid spending any extra money that you have and you save it. It goes towards the goal.

If you don't have extra money, here is where you can try to reduce some of those desired expenses that we talked about earlier, things like golf or shopping, traveling or dining out. Any one of these or a combination of these can be your ticket to finding that extra money to start working towards your goal. Every time you begin to reach a goal, make sure you set a new one. Before you know it, a good habit will form and it will replace the bad.

Careless habit number four is relying on credit cards. Getting comfortable with bad debt, it's become the norm. These credit card companies, they can make record profits as you pay them extremely high amounts of interest. The average interest rate on credit cards is now around 23%. Naturally, these companies want you to be bad with your finances.

How can we fix this one? If you can't afford to put the purchase on your debit card, don't turn to the credit card. If you don't have the money now, you probably won't have it at the end of the month to pay off that credit card. People that always have money, they don't carry debt or balances on their credit card. They pay them off every month.

Getting into this habit does a lot of things for your benefit. First, you don't stack up debt. Second, you can get the rewards and all the benefits of those credit cards and you avoid the interest, as long as you pay it off every month.

Now if you already have a lot of credit card debt, we need to get that paid down as quickly as possible. Start with the card that has the highest rate of interest. Pay that off first. Do it as fast as you can. Then move to the next card until you have everything at a zero balance. If your debts are excessive, you might consider consolidating those debts to a lower interest loan if you qualify.

Careless habit number five, not saving for emergencies. We never know when emergencies are going to happen, those unexpected expenses. If you don't have a budget and a buffer fund, chances are you're going to head back to the credit card.

Anyone can start an emergency fund. The first step is adopting that pay yourself first mindset. Simply start saving a little bit from each paycheck and begin to build that buffer fund. Your emergency fund should have approximately 3 to 6 months worth of living expenses. Keep this fund separate from all other accounts and you only dip into this one if it's a real emergency.

Now careless habit number six, ignoring investment opportunities. Investing is one of the best ways to grow your money. It's almost like passive income. Once you start investing, that money begins to grow and work for you at the same time that you might be earning a great paycheck. When you make the mistake of keeping all of your money in low interest savings accounts, you're missing a tremendous opportunity to let that money really work for you.

What's the solution or the fix for this careless habit? The key is educating yourself on things like stocks and bonds, mutual funds, real estate. But you want to start by learning about these things to figure out which ones are most appealing to you and which ones are most appropriate for you.

Start small. If you're new to investing, take a few steps into the shallow end of the pool, get your feet wet, so to speak, and gradually work yourself into more and more investing. Start as early as possible and be consistent with your savings and investing.

And there you have it, six careless habits that could be keeping you poor and a primer on how to fix them. Your path to financial success, it starts with small consistent changes and sticking to your game plan.

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