Poor Money Habits

Successful, wealthy people do not just suddenly become rich and successful. Success is a process that takes place over many years.

For those who pursue the accumulation of wealth through the Saver-Investor path, there are certain Smart Money Habits that guarantee you will become financially independent, and in some cases, even wealthy.

While knowing what to do is important, knowing what not to do is equally important. The following is a list of Poor Money Habits that will virtually guarantee that you will wind up in the poor house.

1. Charging ordinary living expenses on a credit card – If you are unable to afford meeting your ordinary living expenses and must resort to the use of a credit card to meet your monthly living expenses, you are by definition, living above your means. Accumulating credit card debt is the third leading cause of bankruptcy, behind a job loss (#2) and medical costs (#1).
2. Spending more than 25% of your net income on housing costs – Housing costs include rent, mortgage, real estate taxes, utilities, insurance, repairs and maintenance.
3. Spending more than 15% of your net income on food – This includes groceries and does not include prepared food. Prepared food is part of your entertainment budget.
4. Spending more than 10% of your net income on entertainment/gifts – This category includes bars, restaurants, movies, music, books, gifts etc. Eating out and any prepared food you purchase is part of your entertainment budget.
5. Spending more than 5% of your net income on car expenses – Car expenses include a lease, loan, insurance, gas, tolls, registration fees, repairs and maintenance.
6. Spending more than 5% of your net pay on vacations.
7. Spending any money on gambling – If you’re going to gamble it should come out of your entertainment budget.
8. Going over the top on gift giving – Gifts are part of your entertainment/gift budget. Sticking to your 10% budget will prevent you from going overboard on gift giving.
9. Spending more than 5% on clothing – More than a few of the wealthy in my study had the Rich Habit of buying the bulk of their clothes at goodwill stores. Many Goodwill stores sell high quality clothing at a deep discount. It may require spending a few more dollars on a tailor, but it’s well worth the additional cost.
10. Spontaneous spending – You need to take instant gratification and impulse out of your spending habits. There is always time to plan and shop before your spend your hard earned money.
11. Supersizing Your Life – A bonus, raise, new job with higher pay or inheritance can lead to supersizing your life if you’re not careful. Bigger home, luxury car, jewelry, expensive vacations, etc., all of a sudden become must have items. Big mistake. Stick to your standard of living, no matter how much more money you make.
12. Want Spending – Buying whatever you want, when you want it can wipe out your bank account and lead to credit card debt. Avoid Want Spending.
13. Peer Pressure – Your next door neighbor puts on a deck. It’s beautiful. You want one too. So, you decide to put a deck on your house. Be grateful for what you have. Focus on what you have, not on what you want.
14. Decision Fatigue Spending – There’s a reason the supermarkets put so many items along the check out lines. After an hour of shopping, you begin to suffer from something called Decision Fatigue. This is a loss of willpower. When you lose your willpower, you will lose your ability to control your spending.
15. Emotional Spending – When the emotional part of your brain is in charge, every decision you make will be a bad one. Never allow your emotions to dictate your financial decisions, including spending.

Knowing what not to do, when it comes to money, prevents you from making poor money decisions. Poor Money Habits lead to poor financial decisions that can wipe out savings and lead to debt and poverty.

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