7 Habits That Keep People Poor
Don’t do these things to get rich slow.
In some news that was “shocking” to an X user with nearly a million followers and anyone else living in a cave, 52% of US consumers do not have $2,000 saved for financial emergencies.
BREAKING: nothing is new under the sun.
It is true that most Americans, and the global population, live from one pay period to another. This statistic has been true since before my time and will likely always be true. Dave Ramsey’s 7 baby-step program dates to 1992, after all, and wasn’t the first program to promote basic financial wellness.
Sometimes, the inability to defer savings for the future is unavoidable with only welfare or charity as possible remedies. Most of the time a bad financial situation simply mirrors a pattern of poor decisions and habits.
Here are 7 bad habits common among those who struggle to get ahead. While one or two of them might not spell financial disaster on their own, they all tend to deteriorate financial health.
1. Lengthen loan term to take on more debt
The monthly loan payment appears much more affordable if stretched over a longer period. Want that Dodge Hellcat? Just go for the 84-month loan. This behavior encourages the accumulation of higher debt loads and fails to fully consider the long-term costs, both emotional and financial, of servicing that debt.
2. Pay early withdrawal excise taxes on retirement assets.
Not only is this literally sabotaging future retirement income, but it also results in paying 10% in taxes that would otherwise not have been paid if the money was just taken as income to begin with. When the IRS is says, “this is a bad idea”, we should probably listen. I don’t care what the reason is, don’t cash in your IRA/Roth and pay the excise tax. There’s always a better way.
3. Buy leisure on credit (or with emergency fund)
Financing a vacation or a concert ticket means it is unaffordable. “YOLO!” they say. Correct, which is why we should all get our finances in order. Nobody’s retirement plan is an early death – although people do joke about it.
4. Play the lottery / use betting apps
Americans spend more money on lottery tickets ($113B in 2023)1 than movies, books, converts, video games and sporting tickets combined. And no income is off limits for betting apps like FanDuel, which gladly vacuum the cash flows of overconfident sports fanatics with dreams of quick profits.
5. Trade stocks/crypto
You know how to make huge profits day trading? Become a financial entertainer and sell your pseudo investment strategy to others naïve enough to believe they could be The Chosen One. I have yet to encounter a trader with a verified trade history that outperforms a basic buy-and-hold investment plan. One may exist, but it’s not going to be on a subreddit or an email newsletter.
6. Direct all income into a single checking account (or cash)
A healthy target savings rate is 20% of your income, 15% of which should be directed into a retirement account. When the entire paycheck is deposited into a single checking account, providential intervention is required for a consistent savings plan to materialize. Always automate savings, preferably at the direct deposit level.
7. Refuse to compromise
Sometimes, life throws us more than we can handle to sustain our current lifestyle. The right thing to do is to recognize the facts for what they are and make the necessary, sometimes harsh, decisions to make ends meet. The plebeian thing to do is to borrow money.
We can bemoan impecuniousness all day long, but this will not change human nature. Every single one of the habits above prioritizes immediate gratification over deferment. Ravenous consumption is the behavior of an addict without vision of his future.
Witness the scene when you find yourself in a full waiting room. Most will have their noses pressed against Corning glass to avoid the work of engaging with real people. Developing functional local relationships, like saving, is hard work requiring us to temporarily egress the comfort zone.
Humans will continue to default to whatever is easiest. Conservation of energy is a fundamental rule of physics, and to build wealth we must defy it.
Investment advice offered through National Wealth Management Group, LLC.
The information presented is for educational and informational purposes only and is not intended as a recommendation or specific advice.
North American Association of State and Provincial Lotteries (NASPL)