These 5 Mistakes Will Keep You Poor

Welcome to another episode of We're Talking Money. I'm Dustin Hocken, this is Phil Clark. A lot of you are familiar with the term American Dream, but it's not always an American Dream, and it can turn into an American Nightmare very quick. And that's happening for millions of people across the country. As many as 70% are saying that they live paycheck to paycheck or they struggle with essential expenses. We're not talking about the desired expenses, we're talking about essentials, things that they need to afford just to get through life.

Are you living paycheck to paycheck? We're going to talk about five tips. If you don't do them, these things are going to keep you poor. So let's get started.

Number one, overspending. Probably one of the simplest things on the list, but probably one of the hardest to break. So often we see things online and we just go ahead and pull the trigger, click your PayPal. Take some time. If you see something that you think you really want and you think you really need, just sleep on it. Probably 80% of the time you're going to wake up and you're going to say, you know what, I don't need that 85 in TV, I'm happy with my 65 in.

And you're right, that 24-hour rule, chances are you'll wake up and you realize, you know, I really don't need that. And if it doesn't fit with your goals and objectives, you probably should stay away from those purchases.

Moving on, number two, budgeting. Everyone needs to budget, no matter how much money you make or how little money you make. Budgeting can start to illuminate some of those blind spots in your spending. And once you start tracking a budget, what most people realize is they're spending a lot more money on things that really aren't that important than they ever thought possible.

Big business uses budget for their expenses, for their ability to really understand what the company's doing. It's good enough for them, why wouldn't it be good enough for the individual? No one really likes the sound of budget because they view it as restrictive, but it's really not. It's actually producing a freedom that tells you here's what you can spend, and it helps you avoid having to go into debt to close the gap.

Moving on, number three, avoiding investments. Now we come across this often, especially last year when money market returns were giving you upwards of 5%. It's very easy to say, you know what, I'll take my five, I'm not going to invest my money. But what happened last year? The market popped off 25%. Nothing looked like it would, there wasn't good news. But when you avoid investments, you're giving up growth long term. If you have a financial plan, it's all about time in the market, not timing the market.

Warren Buffett, he's one of the most famous investors of our time, is known for saying if you don't learn to make your money work for you while you sleep, you will never stop working. And that's true. And that can mean stock market investing, that could be real estate investing, creating passive income, options on your stocks, that's passive income. So many ways. This is not limited to just stocks. But if you're not doing that, you're leaving money on the table, and you're never going to grow wealth, and you're going to always work. It's good enough for Mr. Buffett, it's good enough for me.

Brings us number four, neglecting your credit score. Having a good credit score opens lots of opportunities. It gives you more favorable rates when you go to borrow money, which allows you to continue to increase your overall net worth. Neglecting your credit score is sometimes easy to do because you just don't want to look at it, because maybe you've made some mistakes. Maybe you didn't pay your student loans on time, or maybe you missed a couple car payments, or whatever the case may be. But if you don't face the facts and face where you're at and start to make those improvements, then you're always going to stay where you are.

If credit score is not as high as possible, you're never going to get the best rates available, so it is important. Now, people like Dave Ramsey, they will tell you constantly, we don't care about a credit score because we're not going to have any debt. And I appreciate what Ramsey says there. I think it's great if you can live life with no debt, but that's just not the case for most people.

Your credit utilization, so important. Don't use too much, that can drag down your score. And if you cancel a credit card, that's perfectly fine. That by itself won't destroy your credit, as some people unfortunately believe. That's not 100% true. But if your utilization rate goes up and you cancel a card while everything else is maxed, if you will, that will drive down the score.

If you have a higher rate on some of these pieces of debt, now all of a sudden that affects point number one with your budget, because now your home payment, if you have 8% compared to a 4%, well, you may paying thousands of dollars more per month. So the budgeting becomes more difficult.

Do things like check on it at least once a year. There's a misnomer out there that says if you check your credit score, that that can actually harm your credit score, and that's not true. You can get a free report, and these reports do not hurt your credit score. What will hurt the credit score is inquiries from a creditor, someone who is about to give you credit, or they're going to inquire as to what your credit looks like. Those credit checks will absolutely show up on your score. It basically says I've applied for credit. And the more times you're applying, and particularly if you don't get approved, that can hurt. But just getting your credit score so you know where you stand, that does not hurt your score at all.

And lastly, that brings us to number five, keeping up with the Joneses. You may see your neighbor have this new Mercedes-Benz or this new BMW and may think, gosh, I would love to have a new car. Well, do you really need a new car, one? And two, can you really afford the new car? If you're not budgeting, if you're not checking your credit score, if you're already overspending, you probably shouldn't buy the car.

It's because the peer pressure, you're around people that have instant gratification. You're looking for thumbs up, and the more thumbs up you get, the better you feel about yourself. Well, guess how you get thumbs up? You get the new toys and you get to show them on social media. All of that drives almost like dopamine. It's those very kind of decisions that can keep you from arriving, because you start to spend money without any concern for what it might do to your long range planning.

That's why goals are so important. We talk about it a lot, Dustin. That's why budgeting is so important, cash flow analysis is so important, and you got to have enough discipline to say, just because my neighbor did it doesn't mean I need to do it.

There are many mistakes that keep people poor. There's probably hundreds. And if you want to talk about more of those, please reach out to our team at OmniStar. We're here to help. You can have financial freedom, it is real. The American Dream is real. Right now only about 30% of people are actually living that dream because the other 70 are making these mistakes.

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