7 Money Habits Keeping You Poor
- Lifestyle-Driven Wealth™
- Ivy, LyfStyled
Not Being Able To Save Money Is Frustrating!
Working hard to earning an income, then realising that you will not be able to save any of that money can be frustrating. According to Bankrate’s emergency fund report, 57% of people say they will not be able pay for a $1000 emergency expense from their savings. Use LyfStyled Emergency Fund Calculator to determine how much svaings you need at any stage of your life. Not so long ago I also in the same position, not able to pay a $1000 emergency expense from my savings. Till I recognised my bad money habits, then made a plan which I commit to, so that I could stop these bad money habits and started building my wealth.
On this post I share 7 money habits that kept me poor.
1. Falling prey to scams
By now we all know someone who has fallen prey to an internet or cellphone scam.
If you’ve ever fallen for a scam, you might have thought that it was just bad luck. There’s been multiple occasions where I came so close to falling for a scam. The latest being a text message asking me to pay a late tax payment. There were notable red flags I could spot that hinted that this is not a genuine message from the tax authorities.
- The country code of the number is not from that I live in,
- the email address was a domain ending with .XYZ and
- I never received an email or letter from the tax authorities requesting for a payment.
In the end, I have the responsibly to do my own due diligence before making payments especially online.
I have learned how to spot phishing emails and texts by taking online short lessons on how to protect myself from scams, and I know some banks offer these short courses for free.
The money you lose by falling prey to a scam is money that you will never get back because the bank will not be able to recover it. All the while, you are losing out on the passive income you could be earning from investing that amount.
2. Lend money to family & friends
I’ve mentioned this bad habit on another post. What I didn’t mention was the true financial impact it had on my journey to building wealth. I lend people large sums of money that took me years to save up and on 2 occasions I borrowed money in order to lend someone else money. Let’s spilt these two situations:
- Taking money from my own savings, stopped the effect of compounding interest dead in its tracks. Instead of my money working hard for me while I sleep by earning interest, I had a $0 balance placing me in danger of not being able to pay an emergency expense. This was risky and never to be repeated. To top it all off, I never received that money back, meaning I had to start my journey from scratch each time. One of the major life lessons you can learn from Warren Buffet’s wealth building journey is the true power of compounding interest over a long time. Buy now the man had over 60years for compound interest to work its magic. The time wasted when I lend out my money, kept me the beginning of the journey each time.
- Borrowing money to lend money to other people, is one dumb mistake that I regret the most. When I look back, the one question I keep asking myself about this decision is why? Why did I feel that I could place myself in that situation and trust that I will receive the money back? When I had no track record of these people paying anything back, ever. I could go into the details of it but that really does not matter.
- At that point I had to pay interest for money I didn’t gain any benefit from spending.
- I started living pay check to pay check because of my naïve believe that people will pay me back, silly me.
- This one mistake set me back 3 years in my wealth journey.
- If I could go back, I would say to myself, don’t interfere in whatever lesson life is trying to teach this person. They should go to the bank and get that loan themselves.
If you or any one you know is living payckeck to paycheck, when you are done with this video you can watch this video to learn how to stop living paycheck to paycheck.
3. Pricey Hobbies That I Never Revisit
If something is simply a hobby and you have no intention of turning it into a money making business, why would you spend so much on it?
During the pandemic, I bought a piano because I had the intention to improve my piano skills. Now my piano is tucked away in storage collecting dust. More recently with the announcement of the new iPhone range. On the pro range, the cameras have been improved. Does that justify buying the new phone when I don’t even intend to become a photographer or a film maker?
There’s tons of these examples, buying sports equipment when I only use it once every 5 years.
Think thinking of all that money laying my storage and collecting dust. That money could be earning interest or paying you dividends.
On the same tangent…
4. Borrowing for lifestyle expense
If you must borrow money to go on holiday, your wedding, home renovations or any other lifestyle expenses, that’s just a bad money idea waiting to turn into a financial disaster. I have personally never felt the pressure to do this. Touch wood that this remains true in the future.
I know of people who have taken out a car finance to buy a car just because their friend has a similar car. And now the latest trend made popular by tik-tok is to use “girl math” to make purchases you can’t afford. Girl math can be explained by this short example. You would buy an expensive piece of clothing, then calculating how many times you will wear it for it to be paid back. OR spreading out the payments over several months by using services such as Klara.
Whichever way you spin it, you will be stuck paying interest because you borrowed money. Paying interets on an item that will never retain nor be resold for the same value is a waste of money.
5. Paying your friend's expenses on a night out
I learned this lesson the hard way in university. I went out with a friend. She ran out of money and I volunteered to pay for her drinks for the rest of the night. I didn’t check how much that cost me and honestly didn’t mind because I thought, well in the same position, she would do the same for me.
That opportunity came just a few short weeks later. We went out for dinner and followed by drinks at a bar. I told my friend that I was out of money, expecting that she would return the favour and cover my drinks for the night. I was so wrong. She went on to explain a drunk financial loans to me. The basics were that she would withdraw a certain amount of cash to borrow me. I can repay her when I get my money. Oh silly me, I thought she would pay for the drinks like I did just a few weeks before.
Well, now a days there are cash request apps that help you solve this entire debacle. In the Netherlands, people use Tikkie. One person pays, then takes a picture of the slip. On the next day, the person share’s the slip. Each participant identifies what they had and she sends everyone a tikkie to pay her back.
6. Incurring late payment charges
During the first year after relocating to The Netherlands, I went to the dentist with a tooth ache complain before my medical insurance was arranged. The dentist sent the invoice via post however, I never received it because I had already moved from that short term rental apartment and into my long term apartment. The bill remained open for over 4 months. Each month I incurred a Euro 50 charge for admin costs the company incurred in their attempt to remind me to pay the bill. By the time I paid the bill, I had to pay Euro 332 for a Euro 32 dental service.
The same can happen to you for any number of reasons. It’s still your responsibility to make a timely payment for any cost you incur. And if you can’t pay, it’s still your responsibility to make an arrangement with the service provider so you don’t incur these stupid late payment charges.
7. Not insuring my most valuable assets
I used to think: “pfff, that terrible thing would never happen to me”. Or: “that’s just bad luck that it happened to that other person”. Well, I’ve had a taste of that bad luck in recent years.
From having a car accident where I was just lucky to escape with my life and my car was totally written off. To small things like having my air pods stolen, then loosing my husband’s air pods all in the same week. If you’re counting, that’s about Euro 480 lost in a matter of days.
Luckily, I had my car insured. But, the air pods where just gone, nothing to claim which meant another expense to replace them.
If we value the air pods as share’s that’s at least 2 shares I could have purchased and could have been earning passive income in the form of dividents.
Hopefully you can learn from my bad money habits. I realised that its never too late to forgive myself and continue my wealth building journey. To keep track and stay clear of these bad money habits, I use the LyfStyled Personal Financial Statements which you can download for free below.
Design Your Lifestyle
