In this post, I will talk about some worst financial habits people have. This post will effortlessly kill your worst financial habits. I myself have benefited a lot from these tips.
“We all are slaves of our habits”
I hope people who know a little bit about habits understand the above quote. Trust me, we all are slaves of our habits and we should make sure we get some really good masters. We behave how are habits make us behave. “Gandi aadatte” is the word commonly used for bad habits in India.
We all want to achieve financial freedom, but what we don’t know is there are some worst financial habits that are making us financially weak and are avoiding us to get financially free.
Let’s find out what are your financial habits if there are some bad financial habits, then how to remove them from our lives and inculcate some good ones.
To acquire more wealth you have to first understand what is restricting you to build wealth.
Let me brief you about some great financial habits and some worst financial habits
Worst Financial Habits people have nowadays you can effortlessly kill
- Not keeping track of your expenses
- Spending before saving
- Keeping money in a savings account
- Impulse Shopping
- Investing somewhere due to peer pressure without knowledge
- Waiting for the right time to invest
Learn in detail about the worst financial habits people have in 2019?
1. Not keeping track of your expenses
To make money, you have to invest money. To invest money you have to save money. And To save money, you first need to know where you are spending excess money. But the thing is you don’t have a track record of where your money vanishes.
We keep on spending money like there is no tomorrow until we realize we are broke. Trust me, you will be shocked to see how much money you can save when you keep a track of how and where you are spending it. You will start to identify that there was no particular need for that particular expense when you look at the expense sheet.
Almost all self-made millionaires practice frugality as their core financial habit. Do not confuse frugality with misery, frugality means knowing the particular necessity of buying something.
Call to action: Hence, I want the readers to inculcate the habit of keeping track of their money and practice frugality. I particularly use this app to track my expenses and it is a good one
You can use the Money Lover app, I use it particularly to track my expenses.
2. Spending before saving
People earn money and first spend. I am not saying to stop spending, I am just saying to pay yourself first. When you pay yourself first, you pay for your retirement, for your financial freedom.
I have read tons of books such as The Richest Man in Babylon, The Automatic Millionaire, Rich Dad Poor Dad, and The Millionaire Next Door and pay yourself first is mentioned as the core principle to live by.
I need not mention that these books have changed people’s lives in terms of finances, drastically. They mention paying yourself at least 10% of your income no matter how much you earn. You can easily live on 90% of your income. Pay yourself first is the easiest financial habit wealthy people have and adapt.
Common people don’t pay themselves first. They follow the below equation
Income – Expenses = Investment, rather than
Income – Investment = Expenses.
The problem with the first equation is that you spend a large amount upfront and there is hardly anything left for investment. The rich follow the second equation, they invest in stocks, businesses, new skills anything that makes them upgrade themselves. This goes on for a long time and all that is left with you is regret.
Call to action: I request you, people, start following the 2nd equation, pay yourself first and start investing in your bright financial future.
3. Keeping money at home or in Savings account
Keeping a huge amount of money in savings accounts or not even there is a sin in itself. It’s not smart to keep your money in a savings account giving 4% interest when the inflation rate is close to 6%. You are actually losing your money, instead invest in mutual funds, ppfs etc. Money is named as currency because it has been made to flow in the economy like current rather than keeping it at home.
India is a developing nation and when you put your money in investment instruments, the money flows into the economy where it can be lent to companies for expansion or can be directly invested in stocks and mutual funds which will help companies to grow directly helping the economy to grow as well.
Call to action: Therefore start investing your idle money lying in either savings or at home. These habits with small contributions will directly have a big lasting compound effect in your financial future.
4. Impulse Shopping
Impulsively buying things also comes under some worst financial habit people have. How many times it has happened that we go to the market, buy some things and after a certain time we realize that there was no need to buy that stuff? We curse ourselves that we could have saved money there. It used to happen with me and I am sure must have happened with you also.
Impulse shopping gives us pleasure instantly but makes us regret later. We should avoid things that give us instant gratification. All the self-made millionaire practice avoiding things which give pleasure right away so as to avoid impulse buying stuff.
Call to action: Before buying anything ask yourself if you really need it and give yourself at least 3 days and if your answer changes to No, which happens most of the time then don’t buy and Tadda your money is saved.
5. Investing money in some instrument because someone else has done also
The financial future will always be bright with smart financial goal planning. People invest somewhere because someone else has invested there rather than investing what they require.
As an example: Ramesh invested in the stock market to get good returns to marry her daughter after 2 years because Suresh told him to so because he has also invested in the stocks. Now what actually happened is that at the time of marriage the market was down and if Ramesh would have opted to exit, he would have to book a loss which would lower his capital.
Now what was the solution here, he could have easily made small financial goals because 2 years was a low time frame. He could have invested in Fixed Deposits or Debt Mutual Fund which would have fetched him slightly less return than the stock market but he wouldn’t be in a crunch of money.
Call to action: Same goes with you, you have to ask yourself, how much amount I require and at what time so you can decide which investment instrument to enter into. This is known as smart financial goal planning and is considered to be one of the beautiful financial habits.
6. The worst of the worst financial habits people have that you have to remove
People wait for the right time to start an investment. I can tell you from my experience that the best time to invest was yesterday and the second-best time to invest is now. Don’t wait for the correct time, time never waits. Start reading more books and gain more knowledge. The more you learn, the more you earn.
Call to action: Hurry up and Jump in right now. The right time comes never. No market is waiting for you to arrive so that it can start booming. This is the best time to start achieving financial freedom.
Call to action for some good financial habits you should inculcate in 2020
- Make smart financial goals with the amount you need and at what time
- Track your expenses or spending, cut down what you don’t need.
- Invest in yourself, learn new skills. Millionaire follow these things because they know the more they learn the more they earn
- Start acquiring more and more assets that give you passive income like stocks, real estate, businesses or new startups.
- Stop Impulse Shopping only buy something when it is needed.
- Start investing what you saved while you cut down all the expenses keeping in mind the risk factors and parameters mentioned in the first point.
- Start reading because the more you know, the more you grow and the more you grow the more you earn.
- Hurry up and start investing now because time is never right
- Live stress-free life as you know you have a financially secure future.
To get to learn about some financial habits to have, you can definitely read
Thank you for reading, I hope this post helps you gain knowledge in financial freedom.
Read my post on wealth creation.
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