4 Money Habits That Are Stopping You From Building Real Wealth
When it comes to your money you might have some seriously damaging money habits.
Habits you didn’t even know you either had, or were toxic.
I come across these all the time!
Paying for convenience, frivolous spending, incurring costs you were never even aware of, misunderstand credit, and even having the wrong types of savings.
These habits are toxic.
And they’re stopping you from building real wealth.
That’s why I want to introduce you to the 4 money habits that are stopping you from building real wealth.
The 4 Money Mishaps You Need To Avoid
Money Mishap #1: Borrowing Money
We all understand that.
The geezer bursts, school fees suddenly increase, your work jacket rips, you need new shoes, etc.
These things are understandable.
But if you find yourself several days before payday, you’re in dire need of some cash, and you have no savings to fall back on…
Well, the chances are you have a bad money habit.
Having to constantly borrow from partners, friends or family means you need to be far more accountable and responsible with your money.
Everyone needs help from time to time, but if you always borrow it gives off the wrong impression.
What To Do: You need to manage your money better.
How can you do this?
It’s not difficult and takes only a few minutes every month.
The hard part is sticking to it.
You need to live within your means.
Alternatively, you can find ways to increase your income but that doesn’t solve your problem as your “means” just increase and you’d still need to live within those.
It’s all about a strong will, and sticking to your numbers.
Money Mishap #2: Blowing Your Tax Refund
Tax refunds can feel like Christmas came early.
That TV you’ve had your eye on, or that fancy new shirt you want…
But are these really the best things you should be spending that money on?
You and I both know the answer to that.
Some people even go as far as to spend the tax money before they’ve even received it!
This is a seriously bad money habit, and if you’re doing this you need to stop.
Using your credit card to buy something you want because you have some money coming in is not the best thing to do.
Thanks to electronic filing, however, you can typically get your refund within a few weeks deposited directly into your bank account.
If you can plan carefully and wait a few weeks, you can save yourself the added fees or the finance charges from your credit card.
What To Do: It’s not to say you can’t enjoy ANY of your tax refund.
Just be a little smarter with it.
Plan to save at least some of the money.
Rather than planning what you’re going to buy with it, put it somewhere you’ll likely grow it.
If you don’t have any investments, well then now’s as good a time to start as any!
Investment vehicles such as ETFs and Unit Trusts are a perfect place to start.
If you’d like to start today, have a look at this article on ETF investing.
As you start to see the benefits of saving and investing your money you’ll be compelled to do it more and make it a good money habit.
Money Mishap #3: The Not-So-Secret Shoebox
We’ve all been here.
The problem is some people have never left.
Keeping your money in a shoebox under the bed is a poor money habit.
You’re losing out on growth you could be achieving if it were in the right place.
In fact, by keeping it in a shoebox under the bed you’re actually losing money.
How’s that even possible?
The thief that robs us all: Inflation.
Inflation is as escapable as death and taxes.
So whilst you’re keeping that money in a box somewhere, the value of it is eroding.
R100 in 2003 has a very different buying power to R100 today.
Put your money to work, or at the end of the day it’s not going to be worth very much.
What to do: Benefit from investment growth.
Invest your money!
Create possibly the most important money habit you can.
Whilst banks might urge you to put it with them, I’d warn against this.
If inflation averages out at say 7%, but the bank is only giving you 4.5% interest, then you’re still losing money.
The only difference between that situation and the money box under your bed is in this case your just losing a little less.
But you’re still losing.
Invest your money properly.
There are plenty of avenues you can do this, and some that are a lot safer than your shoebox.
Money Mishap #4: Using Your Credit Card As An ATM
I’ve seen this happen a lot.
You go for a round of drinks, everyone pays cash, but you decide to put the entire amount on your credit card and pocket the cash.
You’re effectively using your Credit Card as an ATM.
Why is this a bad money habit?
The interest of course!
On normal swipes or withdrawals, you’re paying far less to do so.
Most credit cards have anywhere from 20% interest and upwards.
The last thing you want to have to do is pay R200 on a R1,000 bill because you wanted to pocket some cash.
What To Do: Limit the use of your credit cards for everyday use.
It’s easy to put charges on your card and then forget about it.
Or worse yet, take time to pay them back.
You could be putting that money to better use every month.
It might not seem a lot now, but an inflation-linked R200 a month into an investment vehicle like an ETF through a tax-free saving account could yield substantial growth over a 20-year period.
Rather pay yourself instead of your bank.
Break These Habits And Put Yourself On the Road To Real Wealth
The money mishaps are easy to make.
But thankfully they’re even easier to avoid.
Learn to budget if you haven’t already, and stick to it. Borrowing constantly is not a habit you want to have.
Put your tax money to better use, or at least a portion of it.
Don’t fall into the ‘shoebox trap’. Put your money to work and let it grow.
Lastly. Your credit card is not an ATM. If you treat it as such your throwing away money that could be put to better use – like investments.
Break these 4 bad money habits and I guarantee you that your path to real wealth will begin immediately.
Until then, here's to good money habits.