3012: 5 Terrible Money Habits Keeping You Broke by Jen Hayes on Financial Goals and Building Wealth

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[00:00:50] It's a Minimalist Monday edition of Optimal Finance Daily, 5 Terrible Money Habits Keeping You Broke by Jen Hayes of jenhayes.me. Many of us set New Year's resolutions about saving money this year, but 80% of resolutions are abandoned by February. Like it or not, most of the financial choices we make in life are based on habits rather than thoughtful consideration.

[00:01:16] Here are some of the most common bad habits that might be keeping you broke. Not setting a budget. Most of the people I know don't have a written budget. They might have a general idea of how much they want to spend in each category, but they don't take the time to write down exact numbers. This might work out alright for super frugal people who never go over budget, but for most people, trying to stick to a vague budget isn't going to cut it.

[00:01:44] Write down your budget, check in regularly, and make adjustments accordingly if needed. If you find yourself overspending often, try the cash envelope system. With this system, you set aside a certain amount of cash each month in several envelopes. One might be labeled eating out, another could be clothes, and so on. Once you run out of cash in your clothes envelope, for example, you can't buy any more clothes until next month. Using this method of budgeting helps you feel the money being taken from you.

[00:02:13] When we use cash, we're less tempted to overspend than we would be if we swiped a credit card and didn't have to pay the bill until next month. Living above your means. The average American household carries over $137,000 of debt. Why is debt such a massive problem in the U.S.? Because far too many of us live beyond our means. We've bought into the lie that debt is normal and that it's a necessary part of life.

[00:02:40] The secret to financial success is not to look rich by racking up a bunch of debt. True financial success comes from the exact opposite. Saving money by living below your means. Live on less than you make, and someday you'll be able to live like no one else. Keeping up with the Joneses. Many of us live beyond our means because we're trying to keep up with the Joneses, and social media has only worsened this problem.

[00:03:07] Every day we're bombarded with images of our friends buying beautiful homes, traveling to exotic places, and purchasing brand new cars. Who wouldn't feel like their shitty studio apartment, road trip to Wisconsin, and 20-year-old car pale in comparison? Just remember, there's no point in trying to keep up with the Joneses. No matter how much you have, there will always be people who have more than you do. And the Joneses you're so jealous of might just be drowning in debt.

[00:03:34] Meanwhile, there are 1 billion people in the world living in extreme poverty. There will always be people who have more than you, but there will always be people who have less. Be thankful for what you have and practice gratitude daily. Impulse purchases. If you want to improve your finances, it's time to make spending decisions mindfully. Instead of buying random stuff because it was on sale, make a plan. Decide what's a priority and what isn't.

[00:04:02] If it's not important, don't buy it just because it's a great deal. Everything is 100% off when you don't buy it. Spending money every day. Some personal finance bloggers are offended by the notion that little expenses can sink a big ship. They argue that your overpriced apartment rent makes a much bigger dent in your budget than your latte habit. While it's true that big expenses matter more, little things can add up quickly if they occur often.

[00:04:30] Going to Starbucks once a month may not matter much, but if you spend $10 a day at your favorite coffee shop, that's $300 a month. $300 can make a huge difference if things are already tight financially. Beware of little expenses you spend money on frequently, such as your daily coffee, buying lunch at work, parking fees, dinners out and entertainment, bottled water, alcohol, or other beverages. Turning your finances around. Ready to get your finances in order?

[00:04:59] Stop relying on bad habits and start living with intention. Make a plan to set a budget, live below your means, and spend mindfully. It'll be difficult at first, but you'll thank yourself later. You just listened to the post titled, Five Terrible Money Habits Keeping You Broke, by Jen Hayes of jenhayes.me. You sign up for something, forget about it after the trial period ends, then you're charged, month after month after month.

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[00:05:56] The app automatically scans your bills to find savings opportunities and will even negotiate with service providers on your behalf. No more waiting on hold. And their new goals feature makes saving automatic, perfect for building an emergency fund or saving for a house. Cancel your unwanted subscriptions and reach your financial goals faster with Rocket Money. Go to rocketmoney.com slash OFD today. That's rocketmoney.com slash OFD.

[00:06:24] Rocketmoney.com slash OFD. We are all at the mercy of our habits, and while it's challenging to establish new habits, the good news is that in the future, these new habits will be the default things you fall back on, so it won't always take so much effort. I've come to see in my own life that I needed to think about money for as long as it took to establish the habits, and then things just kind of went on autopilot, so I don't have to think too much about money anymore.

[00:06:54] This article reminded me of an exchange I had with an Uber driver the other day. He was telling me that his business tanked due to the pandemic, and that's why he was driving for Uber. But he was also stressing about buying a new car, which confused me because the car we were in was really nice. When I told him that I drive a 2010 Mazda 3, he was completely horrified. He said he could never imagine being seen driving such a dumpy car.

[00:07:22] I could tell how much this desire for a new car stressed him out, and I really felt for the guy because it seemed that his sense of self-worth was so tied up in appearances. Through our conversation, it became clear that the gratification of a new car and what he thought that said about him mattered more to him than relieving some of his financial stress. I think this is pretty much the norm in our consumerist culture,

[00:07:46] and it takes a lot of intentionality to give up the desire to keep up with the Joneses. Just remember, it's possible to value saving and investing over spending, and the more you engage with content that reinforces this idea, the more likely this shift will occur. And that's a wrap for another Monday show. Have a great rest of your day, and I'll be back tomorrow where your optimal life awaits. . . . . . Thank you.