Do you ever find yourself struggling to make ends meet, even though you have a steady income? Do you feel like you’re living paycheck to paycheck and can’t seem to get ahead financially? If so, you’re not alone. So many of us have some bad money habits that are keeping us broke, and we don’t even realize it.
Today, we’ll explore some of the most common money habits that prevent us from achieving financial security and ways to break free from them. As you read through, identify some of the things that you can add to your 2023 goals. Something you want to work on and improve on in order to elevate your experience with money and personal finances.
So what are some of these habits?
1. Treating money conversations as a taboo topic
If you are not talking about money, you are not learning about money and you are not surrounding yourself with people who are having healthy money conversations. If this is the case, you may never get the exposure required to grow in matters of personal finance.
You need to know how other people are making money, how they are saving their money, how they are investing, and what they are doing to change their money history or their past bad experiences with money.
I have found that as long as you treat money as a taboo conversation or something that you cannot talk about, you will always handle money badly.
Most of the things I know about money and how to make money, I learned because I exposed myself or I had conversations with people about money. These are people that had already gone before me or had already tried those things/ideas out and they had a thing or two to tell me about it.
I always urge everyone I know to put themselves in spaces and in circles where money is being discussed. The more you talk about something the more you think about it. The more you’re exposed to it, the better you get at it.
It’s pretty much like learning any skill. For instance, I’ve seen people who really want to get good at public speaking join clubs that deal with public speaking, e.g. Toastmasters, and they get better because they’re interacting with people who are really good at it. This challenges them to be better.
Money is not any different. It should not be a taboo conversation. You need to have money conversations with your family, friends, and partners. Just ensure that you’re having money conversations when it matters and with the people that matter.
This is really really going to revolutionize your experience in personal finance.
2. Spending without planning.
If you are unintentional with your spending and you just go as the wind takes you, you’ll most likely be broke often.
You need to start thinking actively about planning and setting goals every beginning of the month or whenever your salary comes in.
The three most important questions to ask yourself are:
- How much money did I make?
- What would I want this money to do for me this month?
- How can I hold myself accountable that I stick to this thing that I said I want my money to do for me?
Try have a money date with yourself every end month to answer these questions and it will bring a level of intentionality and it shows that you respect your money.
Whether you earn Ksh. 50,000 or Ksh 500,000, being intentional with what you’re doing shows a level of respect for your money.
If you struggle with impulse buying or you’ve always spent money without thinking through it, you can start by setting aside time every month for that money date with yourself so that you can intentionally plan how you’ll spend your money that month.
The main problem here is not spending the problem is unintentional spending.
3. Having a victim mentality
I love to call this a ‘life just happens to me’ mentality.
I’ve spoken to people and I’ve coached people who’ve told me, “But coach, there’s no use of budgeting, there’s no need of planning my spending because things just happen to me. I just love to wait and see how the month goes and I’ll figure it out along the way.”
This happens to be an ‘I cannot do anything about it’ mindset which is a bad habit that is not sustainable if you want to live abundantly financially.
What I advise is, always take a leadership role in your personal finances. Appoint yourself as the Chief Financial Officer (CFO) of your life. Start understanding that you are in charge of your life and actually start looking at what you can control or change.
Don’t get me wrong, I know there are so many things you can’t control. You can’t control the economy. You can’t control the government. The tax. You can’t control the cost of living.
But you can control your money, your habits, and how much you earn.
Instead of saying you don’t earn enough (victim mindset), you can change this mindset to, ‘I don’t earn enough but this year, I can and I will find one additional source of income.’ Whether this is a side hustle, starting a business, consulting or something you do on the weekends that gives you some additional money. This is how you take a leadership role in your life.
You can’t live life as if things just happen to you.
Even with the many things that you cannot control in life, you can control your spending. You can learn to say no to immediate gratification. You can choose to invest instead of spending. All these are choices that are within your reach.
This is one of the most revolutionary things that happened to me when I started focusing on my finances. I stopped entertaining thoughts that I can’t control these things and that life is just happening to me.
The moment I owned it and asked myself, “Are there people who’ve been in my position and they’ve been able to figure out how to get out of it?” The answer is YES. So I committed to getting myself out of it because I’m in charge. I can control my money behaviors, my money habits and my spending habits. I am not a victim.
4. Procrastination and avoidance
How many times last year did you say this phrase? ‘I will start again next month.’
This happens a lot. You might have set a goal this month to budget but along the way, things went haywire at some point in the month. What most people will do is give up and decide to try again next month.
That is avoidance. You’re avoiding having to deal with the failure. Having to deal with the fact that you set a budget, you weren’t able to stick with it and now you’re procrastinating sorting that problem that has just come up.
Procrastination and avoidance are habits you do not want to have when it comes to building wealth and not being broke all the time.
So what can you do?
Let’s assume you had Ksh 200,000, you did your budget, it’s now the 15th and things are really not working out the way you thought and now you only have Ksh. 30,000.
Instead of saying you’ll start again next month, I’d advise you to do a mini-budget for the remaining Ksh. 30,000.
What you’re trying to do here is to learn to take accountability when things go wrong. Even the whole process of now having to deal with budgeting for the 30,000 does something to you mentally. You’re now becoming more intentional and taking responsibility for your finances
If something has gone wrong, sort it out as soon as possible. Don’t procrastinate and say you’ll deal with it next month. That’s exactly how some people never ever stick to their budgets or even achieve any one of their financial goals. Just because they keep procrastinating and avoiding the problem that is.
If you feel you’ve been trying to budget, save, or invest and failed every time and now you even believe they don’t work, this could be your chance to take extra action. You could look into getting a financial coach like me or purchase some courses for budgeting.
If you’ve been avoiding setting a budget because you don’t know how to go about it, I have a budgeting masterclass that comes with a free budgeting template. So I will not only teach you how to budget, but I’ll also attach a template that you can use to do your budget.
If investing has been a challenge for you, I also have an investing masterclass that you can take and just set yourself up for success instead of complaining that this investing does not work.
5. Not knowing where your money goes.
Tracking your expenses and knowing exactly where your money is going is absolutely necessary. I’ve had some people tell me that tracking every single coin is quite obsessive but it is not.
You cannot solve a problem if you don’t know where exactly the problem is.
Quick question, do you know how much you spent on food last month? These are details that you should know.
For instance, by tracking your finances, you could find that you spent Ksh. 50,000 on entertainment last month. If you’re trying to fix your budget in the coming month, you can consciously slash this amount to say 20K as you try to recover from tough economic times or if you’ve just had a decrease in your income. You know what you can cut from your spending or what you can reduce.
When you have absolutely no idea where your money goes even if you wanted to sort out some issues you do not even know what the problem is.
This is a habit that you can develop. I personally use an Excel sheet and a mobile app known as Money Manager App to track my expenses.
Every time I spend on anything, I put it down on the app and at the end of the month I get a report to show me exactly how much money I spent that month. I then transfer that data into my Excel sheet and am able to make some adjustments and some decisions for the following month.
6. Not paying yourself first.
This means putting money in your savings or investments first when the paycheck comes in.
What most people do is, after the paycheck comes in, they pay the bills, pay debts, take care of a couple of things that have been pending and then say that whatever is left is what will be saved or invested.
More often than not there’s always so much demand on the money that by the time you’re done attending to everything you wanted to attend to there is nothing left to save or invest.
Doing this month after month, it’s very easy to go for a whole year without saving or investing because your mindset is not to pay yourself first.
If you really want to crush your savings and investment goals this year adopt the paying yourself first strategy.
Intentionally set the amount you want to save or invest in a particular month and immediately your pay comes, even before you pay your rent, save the intended amount first.
7. Living above your means.
Another habit that could be keeping you broke is living above your means and spending on things that you cannot afford.
When I want to audit/examine whether I’m living above my means, I love to incorporate The 50-30-20 budgeting rule. This rule states that 50% of my income should cover my mandatory bills and expenses. 30% should go toward savings, investments and debt repayments and the remaining 20% should go toward leisure and enjoyment.
If your bills and expenses amount to 80% and above then it’s an indication that you are living above your means because there’s really little to nothing left to save or invest, pay debt, and for your social life.
If you audit your finances and find that you’re living above your means there are two options you could consider. Either choose to cut down on your expenses and unnecessary spending to bring that figure as low as possible. If you’ve already done that and you’re still living above your means then you need to prioritize and find ways to make additional money.
The most important thing when it comes to wealth building is not only making money but also keeping some of that money that you’ve made. If you keep spending all of the money that you make and you don’t keep some in terms of savings and investments, you will be broke forever.
Wealth is what is left after you’ve spent.
8. Jumping on every get-rich-quick scheme that comes up.
I know we all want to make money and secure the bag now. But successful investing and wealth building takes time, patience and consistency. Wealth is not built overnight.
You might want to educate yourself on the basics of investments and understand what exactly it takes to build a sustainable investment portfolio. Find out what an investment portfolio should look like, and how you should mix your risk appetite then choose what works for you.
All this requires lots of reading, research, training and exposing yourself to this kind of information often.
Before you jump on any trend that an influencer has mentioned or something you’ve heard from a friend or relative, first do your due diligence. Always take your time to conduct research on any product or on any investment. Get to find out where your money is being invested, what the risk associated with that asset is, who runs the company, how long have they been in existence, where are you getting the 21% or 18% interest from, what is the market average…You need to know all this before you decide to choose an investment method.
Be sure that whatever you’re choosing to invest your money in is in alignment with your goals.
For instance, I don’t invest in Forex or Crypto. Not that they are a bad method of investing. It has been working for a lot of people. It’s just because currently in the stage of wealth building that I’m in, I still have not found a place for Crypto or Forex.
Not every investment option in the market is good for you. So don’t just jump into every new thing that comes up. Have a plan and stick to it in the long term.
The really wealthy people we know today found one, two or three things that worked for them and stuck with those things for the long term.
9. Having a consumer mentality.
You need to ask yourself, ‘what am I buying with my money?’
Having a consumer mentality means you’re only buying the big brands, just because.
I could choose to spend Ksh.500,000 or more on a handbag or I could choose to use that Ksh. 500,000 to get a bond or invest in shares.
If you have a consumer mentality, you will always be buying material stuff and liabilities as opposed to assets.
You will always be trying to keep up with the Joneses and keep trying to show people that you’re still doing well.
Remember, the goal is to actually be wealthy not to just look wealthy.
Understanding this, you can then start shifting your mindset from a consumer mindset to one that directs you to also acquire assets and investments instead of just acquiring material stuff.
10. Complaining all the time & doing nothing about it.
The last habit that could be keeping you broke is complaining about everything. About your money situation, about the economy, how budgeting doesn’t work for you, how investing is just not doing it for you and not doing anything about it.
If you’re complaining and you’re not doing anything about it you will still remain broke.
In case budgeting did not work for you last year stop complaining about it and figure out a way that budgeting can work for you this year.
If you were not able to consistently save and invest last month, instead of complaining about it, find out how you can learn to save and invest this year.
If you don’t make enough money start figuring out and innovating new ways of making extra money.
We could all complain about the government and the economy but remember, we all have 24 hours, and we are all operating in the same recession and under the same tax regime especially if you’re a Kenyan like me. Yet, we still have people figuring out and innovating new ways of making money every day.
This year, I’ve committed to not complaining about my money situation or the government or taxes. Instead, I’ll be using that energy to figure out how I can make more money to keep up with the rising cost of living and the high taxes. I need to find out how I can leverage a skill or a talent to set up a new business or I can negotiate better pay for my services and in my business.
Less talk more action.
Over to you.
If you’d like to join me in this ‘less talk -> more action’ movement, here are some of the actions you can take today:
I share tips, offers and nuggets that will help you elevate your financial literacy this year and keep ahead with your personal finances.