On first glance, you think you are completely responsible with your finances. You work hard, don't spend overly much but yet you still find yourself broke every month.
Sometimes, we can all make decisions that might seem reasonable but in fact, make your financial situation even worse. Here are 11 such financial decisions that might endanger your finances and keep you poor.
1. You misunderstand wealth
Bad financial state starts from misunderstanding wealth.
The thing is, you can't measure wealth in dollars, but instead, in time, according to Robert Kiyosaki.
If you should lose your job today, how long could you survive with your current savings? If you have enough money for 5 months, you are wealthy in the terms of 5 months.
It doesn't matter how much money you earn. What matters is how you can manage that money.
Even if your neighbor has a bigger house, a new car, and the most expensive clothes, it doesn't mean he's wealthier than you. It's possible he might only have money for 2 months while you might last for a whole year.
As soon as you start evaluating wealth according to this principle, you'll create less stress around money.
2. You spend more money than you can earn
This is the oldest and the most condemning decision that people just seem to keep making.
You find a good job, move to a bigger house and live a luxurious life. In a few months, you lose the job, the house and the whole American dream comes crashing down.
Sounds familiar? Unfortunately, this happens more often than any of us would like to see.
As soon as people get a better job or a pay raise, they tend to spend heavily and usually, well beyond their means, putting them back to a financial black hole despite better earnings.
3. You use future earnings in order to finance current expenses
This didn't sound very logical, right?
Yet people are doing this every single day. Thousands of people buy things they often don't even need and they use money they don't really have. By that, we mean credit cards and loans.
All credit products work the same way. By taking a loan, you assume that you'll have money in the future. But you'll use the loan in order to buy something today.
Essentially, you are spending your future money way before you've even earned it.
4. You are using your credit card, though you don't really need it
Yes, we know – those shoes are on sale and you need them in your life. That new phone is a must-have. Your favorite designer came out with a new collection.
In today's society, we're constantly driven by consumerism. Sometimes, this consumerism goes too far and makes us do stupid things such as max out a credit card and then realize there's not enough money to actually pay the bill.
5. You are not thinking about your future
When you are in your 20s or 30s, retirement seems as such a distant future. By ignoring retirement questions, you are just digging a huge hole in your finances.
The sooner you start thinking about retirement, the more secure you'll be. Make sure you are on good terms with your retirement plan and start saving and investing.
6. You are not using every opportunity
Though it's hard to evaluate possible opportunities in the present, think carefully before you let something slip past you. No matter if it's a possible job or something else – it's better to take risks than later regret. You never know what new experiences might bring.
7. You don't have emergency savings
According to some reports, almost 25% of Americans don't have any emergency savings. If an emergency should strike, they are left in the lurch.
If 2020 has thought us anything, then it's the impact of emergencies. You never know when something might happen. To avoid taking out personal loans or using credit cards, start an emergency savings fund that's only meant to be used in dire situations.
8. You don't have any investments
To some, investing seems like something that's reserved only for wealthy people. In reality, everyone can start investing, even with very limited funds and knowledge.
Even a few hundred dollars is plenty to get started. What matters is taking the first step towards financial freedom – and investing is that first step.
9. You are not entrepreneurial enough
If you can't seem to make ends meet, it's possible that your financial well-being is stuck due to your passive attitude.
Maybe you're too passive at work and don't take enough initiative. Maybe you're talented in something but don't use your talents. Maybe you have some ideas but you are afraid to execute them. Success rewards only those who take action.
It's better to try and fail than to never try and always wonder if you would have been successful.
10. You don't take responsibility for your actions
It's very comforting to think how your employer is at fault when your salary is too low.
But is that actually true? Are others really responsible for your wealth? Blaming others is just an excuse for not taking action.
In order to build a better life and become wealthier, you need to understand that no one else is responsible for your wealth. Once you realize that, you'll also notice how it's easier for you to grab opportunities and take more action which, in turn, generates a better income.
11. You are impulse-buying and only follow the price tag
Impulse-buying is the bane of your wallet and one of the worst financial decisions you can ever make.
What's even worse is buying things only because they are on sale. In reality, you should always consider the price-performance ratio. Lower price doesn't always mean you are making a budget-friendly decision.
Sometimes, we are all making bad financial decisions but once you start analyzing your actions more, you'll see how things turn for the better. All it takes is rooting out some lousy financial habits like the ones above.
