When we want to get our finances in order, we tend to focus on numbers. How much money do we have coming in? How much is going out? How much more do we need to make?
While the numbers are important—extremely important—there is something that has a far greater impact on your finances: your habits. Your money habits—whether healthy or unhealthy—either support your financial situation or sabotage it.
Being aware of the specific behaviors that cause you to stumble financially will allow you, with effort, to reduce the negative impact they have and to work at eliminating them altogether.
Beware of these ten money habits that will make you broke.
1. Comparing Yourself to Others
Comparing yourself to others and then trying to compete, (a.k.a. “keeping up with the Joneses”) is a game you can’t win—one that will lead you to make poor financial decisions. This habit is an easy one to succumb to, as your best friend’s new car/kitchen remodel/trip to the Caribbean are always just a couple of clicks away.
Counter the temptation to keep up with others by focusing on the positive things that are going on in your life. Celebrate them daily instead of paying attention to what everyone else has. Also, keep in mind that the Joneses are broke, so keeping up with them will make you broke too.
2. Not Having a Plan
Having no financial destination is extremely damaging. Not knowing where you’re heading or what you’re working towards means that you can eventually find yourself in a place you didn’t intend to be.
As Yogi Berra said, “If you don’t know where you are going, you’ll end up someplace else.” When your financial goals are not defined, you have no boundaries within which to operate, causing you to make choices that lead you down the wrong path. Identify your financial goals—both big picture and practical ones—so that you have guidelines that keep you in check.
3. Negative Thinking
If your financial situation is not where you want it to be, give some attention to the thoughts and words that you use. What you think has tremendous power over your actions. If you find yourself thinking and saying things such as “I’m never going to get from under this mess,” or “There’s no way things are going to get better,” you are pretty much guaranteeing that your finances will stay the same.
Your actions will line up with your thoughts—whatever they are. So make the conscious decision to alter your thinking, and your actions will follow.
4. Spending Outside of What You Value
You may feel like you don’t have enough money to do what you want to do because you’re not prioritizing how to spend your money. What is happening is your money is going towards things that you don’t necessarily value, and as long is that is the case, you will always feel broke.
As an exercise, list all the things that are important to you, (e.g., family time, travel, personal development, etc.). Next, take a look at your spending over the past few months and see if your money has been going towards those things. If not, identify what you can eliminate so that you can prioritize what you value.
5. Living Beyond Your Means
This one seems obvious, but actually, it isn’t. Many people assume living beyond their means indicates that they have an extravagant, lavish lifestyle. While this could be the case, often it is not. Spending more money than you have coming in can be as subtle as buying clothes with your credit card because you don’t get paid until next week.
Get out of the downward spiral of living beyond your means by committing to stay within the boundaries of your income. This may mean delaying or saying, “no” to opportunities to spend, but it will keep you from digging a hole that will be hard to get out of.
6. Emotional Spending
Like emotional eating, emotional spending can wreak havoc on your life. You just got into an argument with your spouse; you had a bad day at work; you’re bummed because something didn’t go your way, etc., and you deal with it by doing a little online shopping. Emotional spending can get us into serious trouble because we don’t always realize that’s what we’re doing.
Curtail this habit by making the decision ahead of time to keep your emotions out of your financial decisions. Identify an accountability partner (your spouse, friend, relative, etc.) that you can contact when you sense that your emotions are taking control of your money.
7. Giving into Financial Bullies
Do you have people in your life that strongarm you into doing things even though they’re aware of the potential negative impact on you financially? These people are financial bullies. They are more interested in controlling you and getting their way than prioritizing your well-being.
Your financially bully could be your co-worker, friend, or even your sweet, dear mom. Work up resistance to these bullies by practicing how to say “no,” to them. While “No,” is a complete sentence, sometimes financial bullies don’t realize that. Use your knowledge of the person in your life to tailor your “no’s” in a way they will hear.
8. Not Talking About Money
Depending on your upbringing you may have been encouraged not to talk about money. But this habit is damaging because it’s easy to go down a negative financial path when you keep things to yourself.
This doesn’t mean blab to the world the nitty gritty of your finances. Rather, it means choosing to make money a natural, healthy topic of conversation in your relationships which can prevent you from potentially hiding the reality of your situation.
9. Ignoring Your Situation
Not recognizing exactly where you stand financially is a crippling habit and one that is easy to fall into. Choosing not to face the reality of your situation keeps you where you are, or worse, causes you to make decisions that damage your situation further.
Do away with denial by deciding to own up to what’s going on financially—no matter how bad you think it is. Often, not knowing is worse and scarier than the reality you’re avoiding.
10. Expecting Change Without Putting In Effort
We all want positive change, but we usually want it NOW and without putting in the hard work to bring about said change. It’s tough to admit this one, but this habit can lead you to make poor decisions that seem to be quick fixes but in the end make you broke.
Recognize the fact that change is impossible without effort, and be willing to exercise the discipline and patience necessary to work at and see the change you are hoping for.
You Are Where You Are Because of Your Money Habits
Your habits and behaviors have a significant impact on your finances. They’ve led you to where you are now and will continue to dictate where you’re headed. Again, while the numbers surrounding your situation are significant, it doesn’t matter how much money you bring in if it will be sabotaged by your habits.
Identify which of these money habits are pitfalls for you, so you can take action to counter them.