6 Money Habits That You Should Break Now To Become Wealthy
Written by
Crystal Mayer
Edited by
Molly Sullivan
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If you dream of becoming rich one day, you’ll need to stop doing things that could be holding you back. There are several money moves that you can make now that can help build wealth over the long term. Waiting to break bad habits or to start good ones is probably the biggest mistake you can make.
The most important thing you can do is to set financial goals and stick to them. Once you have a plan, you can take the actions that you need to be successful. Here are the six money habits that you should break now to become wealthy in the future.
Only Making Minimum Payments on Credit Cards
If you only make the minimum payment on high-interest credit cards, you will end up paying on them for years on end. The average interest rate on most credit cards is 20% or higher. This means that you will be paying substantial amounts of interest on everything that you buy if you carry a balance each month. When you only pay the minimum amount, the majority of your payment goes toward the interest and not the principal balance.
Unless you want to spend years of your life paying off a $3,000 credit card balance, you need to pay more than the minimum amount each month. There are several methods for tackling credit card debt, including the snowball method, where you focus on paying debts with the smallest balances first.
Not Investing
Most financial experts recommend investing as early as possible in order to build wealth. Even if you do not believe that you have any money to invest, they suggest finding a way. You can start by evaluating your money habits and investing a portion of your nonessential spending.
It is also important to not wait to start saving for retirement. Many people don’t think about putting away money for their retirement until they are in their 40s or 50s. Some people edge toward retirement age with no savings at all. The Survey of Income and Program Participation (SIPP) by the U.S. Census Bureau found that nearly half (49%) of adults between the ages of 55 and 66 “had no personal retirement savings” in 2017.
Spending More Than You Make
If you want to stop living paycheck to paycheck, you need to stop spending more money than you make. If you live beyond your means, you will not be able to save or invest. Your emergency fund will remain empty, and you will likely struggle to meet your financial obligations. If you find yourself with little to no money left each month, take a look at how you spend money and whether there are areas where you can cut back.
Failing To Stick To a Budget
The key to living within your means is establishing a budget and sticking to it. Start by writing down all of your income and expenses. Look at your bank and credit card statements, and do not forget to account for any cash purchases that you make.
Once you know how much money you have to work with each month and your essential living expenses, you can then decide what you have left over to help you achieve your financial goals. Cut back your discretionary spending and put it toward your emergency fund or consider investing.
Spending Too Much on Housing
While buying a home can be a great investment, it can also be a money pit. Buying more house than you can afford or overspending on rent can create a financial hardship that is difficult to overcome. Finding a more affordable abode can help ensure that you have money in the bank to help you live the life that you want without financial worry.
Most money experts agree that housing costs should not exceed approximately 30% of your income. Plus, you’ll want to keep in mind that the bigger the house, the bigger the expenses each month. Remember to factor in property taxes, insurance premiums, and maintenance costs in addition to your rent or mortgage.
Impulse Spending
Finally, if you want to be rich, you will have to give up impulse buying. While Amazon and other companies make it extraordinarily easy to buy things on a whim, you should exercise discipline. Buying unnecessary items can leave you feeling good at the moment but devastated when you see your bank statement.
Avoid temptation by deleting apps that you frequently purchase from or setting a limit on how much you can spend each month. Completely depriving yourself could backfire, so build a little wriggle room into your budget and reconsider adding that must-have thing to your cart.
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