11 Small Money Habits That Separate People Who Stay Broke From Those Who Don’t
Just Life / ShutterstockMoney isn’t always easy to manage. If you’re anything like me, you may not have grown up learning how to budget. While my parents tried to instill some positive financial values, I felt completely confused the first time I had to manage my own bank account.
Some people learn money management through trial and error. Whether they deal with their first overdraft fee and learn their lesson, or watch themselves go deep into debt, some events change the way we see money. However, not everyone has the same experience. They may not correct their mistakes and instead, stay in a bad cycle with their finances. These behaviors separate people who stay broke from those who have a better hold on their bank accounts.
These are 11 small money habits that separate people who stay broke from those who don't
1. They spend without thinking
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Have you ever gone shopping with a group of friends? You may get caught up in the fun of it. Instead of thinking through what you’re buying, you’re influenced by the people you are with. Maybe everyone ends up buying the same thing. It’s not something you need, but the fun of having the same thing as your friends makes the purchase worth it, at least in that moment. This may be an example of emotional spending.
Spending without thinking can keep people broke. Whether it’s buying the trendiest item just to say they have it or buying things they’ll never use, these are small but destructive money habits. It’s not easy to say no to peer pressure, but if you spend without thinking to try to impress or have fun with the people around you, it may keep your bank balance down.
2. They live above their means
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It can be difficult to admit our bank balance isn't high enough to sustain the lifestyle we may want. Many of us are working towards the life we want, but living in reality that we can’t have just yet. Some people handle this reality better than others. They may be able to save their money and only spend what they absolutely have to. Others may live above their means as if they have unlimited financial resources.
A study found that the average American spends $1.10 for every $1.00 they earn. They are spending above their means. While this is a bigger systemic issue, it’s also a sign that many people are spending more money than they have.
3. They rack up debt
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Debt is a serious issue for many of us. We are all aware of the crushing feeling of student loan debt. Along with taking out loans, people may also open as many credit cards as they can. If they don’t have the money in their account for what they want to buy, they may just charge their credit cards. This can create an unhealthy spending habit.
It can be hard to get out of debt. Some credit cards and loan providers charge interest so high that your balance rises even when you aren’t actively spending money. If someone is in a cycle of staying broke, they may be relying too much on credit cards.
4. They don’t have savings
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If someone is struggling to make ends meet, they may not have a savings account. Let’s face it, everything is expensive these days. However, we should all try to save at least some of our money, if we can. If someone spends freely without thinking about building savings, they set themselves apart from those who have money. They may be struggling more than they let on.
Spending more than saving can get people into serious money trouble. When someone has savings they can lean on in times of need, they may be more likely to keep their bank account high without the fear of going broke. Certain people may prefer spending over saving.
5. They avoid learning financial literacy
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I’ll be honest, I had to research financial literacy when I became an adult. If you grew up in similar circumstances to mine, school didn’t teach us much, if anything, about balancing our bank accounts. Instead, we were left to our own devices to figure out good and bad financial circumstances. This means many of us went through a period of staying broke before we figured out how to save money.
“Financial literacy is about learning how to manage your money wisely. This includes knowing how to save, budget, and invest your money. It also means understanding interest rates and personal financial management. When you are financially literate, you can make good choices about spending and saving, avoid debt, and plan for your future,” says the Library of Congress.
6. They make decisions based on emotions
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Has someone ever told you to think with your head instead of your heart? Sometimes, we have to put proper thought into our decisions. Our emotions can blur the thinking process. When it comes to finances, it’s especially important to be thoughtful when coming to conclusions. If we let our emotions get in the way, we may not make the best choices.
I’ve been guilty of making emotion-based purchases. Certain things make me think of beloved family members, or I’ll randomly feel a connection to something I certainly don’t need. This spending behavior has gotten me in trouble in the past. Thinking through purchases clearly, rather than with your heart, is important.
7. They don’t have emergency funds
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I learned this lesson the hard way. A few years ago, my cat developed a serious health condition that landed him in the emergency vet. He ended up having a very expensive surgery to save his life. I had to apply for credit cards on the spot to pay the massive vet fees. Having emergency funds would have been helpful.
Having a fund like this will help protect your bank account in moments of stress. It’s not easy to save, especially if you are living paycheck to paycheck. However, emergency funds separate the financially stable from those who are not.
8. They chase the feeling of spending money
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Spending money can be exhilarating. Let’s be honest, there is something fun about buying something we’ve been eyeing for a while. Of course, it’s totally fine to buy things occasionally. The issue is becoming motivated by the excitement of spending money. When our emotions get tied to our money habits, it can be difficult to save. Over-spending separates people who stay broke from those who do not.
“We all experience emotions, and it is common to have the occasional impulse to buy something when we are feeling down, stressed, or even happy. However, when these impulses become excessive, we may be dealing with a more severe problem: compulsive buying disorder,” says Joyce Marter, LCPC, for Psychology Today.
9. They do not budget
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Budgeting is key. It helps keep our finances on track. If something doesn’t fit the budget, it takes self-control not to buy it. Some people do well with budgeting. It separates them from those who stay broke. They hold themselves accountable, which goes a long way. Money isn’t easy to balance, but keeping a budget can be helpful.
People who don’t keep a budget may spend without thinking. They buy whatever they want without checking their account balance. This can put them into serious financial trouble. They may stay broke rather than be financially stable.
10. They buy what they want before what they need
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Spending money on necessities is not fun. We’d all much rather buy the fun stuff than things we need. Shopping for makeup and clothes is more appealing than paying bills. However, we have to prioritize our essentials before entertainment. People who are in the habit of spending money on wants rather than needs may be in a cycle of being broke.
We need money to pay our rent, medical insurance, car payment, and grocery bills, and that’s just scratching the surface. It’s expensive to survive. Prioritizing spending money on what we need rather than what we want is important, but it’s not always easy for everyone.
11. They do not invest wisely
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Investing isn’t something that comes naturally to some of us. Trust me, I’m not sure I’ve ever had enough extra cash to place into investments. However, if I could go back in time, I might have made different decisions that allowed me to invest wisely. Some people prefer to grow their money rather than spend it. For those who are constantly broke, this either isn’t an option or is not their top priority.
Our emotions play a big role in our investing habits. If someone has success investing, they are more likely to do it again. This can set wealthy people apart from those who aren’t.
Haley Van Horn is a freelance writer with a master’s degree in Humanities, living in Los Angeles. Her focus includes entertainment and lifestyle stories.
