5 Money Habits that are Leaving You Broke
No one makes money blunders on purpose, but sometimes we don’t even realize our bad habits.
“In many cases people make mistakes without even knowing they are making them,” says Mike Finley, author of Financial Happine$$. “One example is chasing happiness outside a job that is not giving any personal satisfaction.”
From staying in a dead-end job to living beyond your means, experts share five money mistakes that can leave you broke:
1. Living Beyond Your Means
One of the quickest ways to end up in debt is spending more than you make. It’s easy to overspend, but it’s hard to climb out of debt.
“For most people, there probably isn’t an endless supply of cash,” says Gregory Brown, a tax partner at accounting and business consulting firm Sensiba San Filippo. “Even famous athletes and celebrities must learn to live within their means.”
Splurging is acceptable from time to time, but keep it reasonable. Brown recommends people with an overspending problem pay down the debt with the highest interest rate first, and only use cash to avoid the temptation.
2. Staying in a Dead-End Job
Job security is important, but experts say your career shouldn’t be at the expense of your happiness.
“People stay at a job they hate so they try to buy happiness,” says Finley. “They buy more and more stuff to feel better and in many cases they are picking up monthly payments and stay in the job they hate to make those payments and the circle continues.”
3. Relying on One Source of Income
Diversification is key when it comes to investing, and the same can be said about income. Being reliant on one source of income heightens the risk of financial ruin if that revenue stream dries up.
“No matter how big, you should never be dependent on one flow of income,” says Grant Cardone, author of If You're Not First, You're Last. “I knew an executive in 2008 that was earning $350,000 a year and suddenly had that income shut down.” While it may not be possible to work multiple jobs to diversify income sources, experts recommend looking into side gig or consulting jobs to help supplement an income.
4. Frivolous investment Choices
Everyone wants to make a quick windfall in the stock market, but the chances are slim that you are going to become a millionaire chasing the latest hot stock. According to Cardone, you don’t want to invest in some high-flying technology or gadget that can easily be replaced by the next up and comer. He pointed to Blackberry as one example of a company that was disrupted by something new and fell from being the leader of the pack
People who have just come into money are often approached to make risky investments, like financing a startup or going in on a shady real estate deal, says Brown. “In many of these cases, the impulse to invest is driven by emotion rather than analysis. The risk of losing is high,” he says. “There should be no snap decisions regarding significant investments. Instead, seek the help of a financial professional you trust.”
5. Trying to Be Happy with Things
“Too many people are trying to find happiness externally,” say Finley. “What they don’t realize is happiness is within themselves.”
But it’s easier said than done to give up materialistic ways. Finley says to come to the realization that things won’t bring you happiness and refrain from spending on those things that are not necessities. “If you’re not spending, you’ll start saving and wisely investing to build wealth gradually over time,” he says.