Unleashing Financial Freedom: 9 Common Money Habits Holding You Back and How to Break Free

Money and finance have been my lifelong pursuit, a journey that began with a degree in finance, a qualification in accounting, and a successful career in investment banking. Over the course of the last decade, I have immersed myself in the world of money, learning how to navigate its nuances and complexities with finesse. But the most valuable lesson I have gleaned from this pursuit is the art of self-mastery when it comes to personal finances.

I have had to confront my own bad money habits head-on, and in the process, I have gained the wisdom to break free from them. In this guide, I am delighted to share with you nine common money habits that hold people back, along with practical tips on how to bust through them and achieve financial freedom. Let’s dive in!

1) Paying Yourself First

Paying yourself – a concept introduced by the renowned financial guru Robert Kiyosaki in his blockbuster book, Rich Dad, Poor Dad, has now become a staple in the financial freedom blueprint. Kiyosaki’s profound insight lays out two contrasting ways of paying bills: the first one, a habit of the poor, involves paying oneself last. This means that as soon as the paycheck comes in, the bills are paid first – the rent, phone bill, subscriptions, social plans, and whatever’s left over, if any, is saved.

It’s a laughable practice that leaves one financially vulnerable and devoid of any real savings. On the other hand, the second method, a habit of the rich, involves paying oneself first – a complete reversal of the poor people’s habit. By taking at least 10% of the paycheck and setting it aside in a savings account, one treats it like a bill that must be paid. This crucial step ensures that the money is saved rather than squandered on impulsive spending.

Many people may argue that living paycheck to paycheck makes it impossible to save, but the truth is that when you start paying yourself first, your mind will shift to finding ways to make your finances work for the whole month. Instead of mindlessly spending on bills, new items, or weekend getaways, you’ll be able to structure your finances to prioritize your savings.

2) Getting Comfortable With Bad Debt

In this era of plastic money, debt is no longer a taboo; it’s second nature. People take out loans to fund even the tiniest of pleasures, from gift-giving to designer threads. But here’s a life lesson I’ve learned the hard way: if you can’t afford to pay for it in cash, you probably shouldn’t be buying it. After all, credit card companies thrive on keeping you financially vulnerable, as it’s in their best interest to maximize your debt.

The average interest rate on credit cards is a hefty 22%, negating any potential benefits or rewards these companies may flaunt. However, in exceptional circumstances, such as emergency healthcare, real estate, and education, the debt can’t be avoided, but it still requires careful management and prompt repayment. Remember, there’s nothing whimsical about the burden of bad debt, so it’s best to stay vigilant and pay off high-interest debt as soon as possible.

3) Not Having a Stockpile

In the world of personal finance, there are few things more important than having a cushion to fall back on. It’s like a cozy blanket on a chilly winter’s night – it gives you the peace of mind to sleep soundly, knowing that you’re protected from whatever the world might throw your way. This is why, dear readers, it’s absolutely essential to pay yourself first and set aside a healthy stash of savings.

A buffer of three to six months’ worth of expenses is a good place to start – enough to weather any storm, but not so much that you’re missing out on life’s little luxuries. And let me tell you, my dear friends, that having this buffer is worth its weight in gold. Not only does it free up your mind to focus on the things that really matter, but it also gives you the flexibility to take risks and pursue your dreams.

So start putting that 10% away, my dear readers, and watch as your stockpile grows. Before you know it, you’ll be ready to take on the world and build the investment portfolio of your dreams.

4) Not Knowing Your Income or Expenses Properly

As I delve into the realm of personal finance, I’m struck by the importance of knowing your income and expenses like the back of your hand. Picture this: you’re setting out on a journey, but you have no idea where you’re starting from. Without a clear understanding of your financial situation, how can you hope to reach your desired destination? It’s a bit like driving with a blindfold on – it’s a recipe for disaster, my friends.

Enter lifestyle inflation. It’s a sneaky little devil that creeps up on us all. As our income rises, so does our spending. It’s a never-ending cycle of bigger houses, nicer cars, and more spending. And while it may seem normal, it’s a surefire way to derail your financial future.

So, what’s the solution? It’s simple – take control of your finances. It all starts with a budget tracker. This trusty tool will help you map out your income, expenses, and that all-important 10%. Keep track of your bills, mortgage, rent, and debt repayments. And don’t forget to factor in your spending – those little indulgences can add up fast.

Make a date with your budget tracker at least every three months. By staying on top of your finances, you’ll be able to see your assets and liabilities clearly. You’ll have a tangible goal in mind and a roadmap for getting there. And when you have a clear plan, you’re far more likely to build wealth and achieve financial success.

So go ahead, take a peek at those numbers in black and white. It may just be the trigger you need to take control of your financial future.

5) Expensive Hobbies

In today’s world, shopping has become a habitual pastime, and while it may provide temporary relief, it ultimately leads to a vicious cycle of consumerism. The omnipresent marketing and advertising machinery of multi-billion dollar corporations has masterfully crafted their messages to play on our psychology of fear and FOMO (fear of missing out). We’re constantly bombarded with subliminal messages about what we should own, where we should go on vacation, and even what we should wear. It’s a never-ending cycle of consumerism, and it’s easy to get caught up in the rat race.

But there’s good news for those looking to break free from this cycle. As a channel for finance and abundance, I highly recommend investing in skills, experiences, and education. These are the hobbies that truly add value to our lives, and no one can take them away from us. Instead of splurging on expensive designer handbags or gadgets that will only be outdated in a few months, redirect your funds towards learning a new language, developing a new skill set, or traveling to a new destination. These are the hobbies that will enrich your life in the long term, and even potentially lead to a higher paycheck and greater wealth in the future. So instead of succumbing to the allure of consumerism, invest in yourself and watch your abundance grow.

6) Focusing Purely on Saving Money

Ah, the elusive pursuit of financial freedom – a game of balances, nuances, and sometimes, sheer luck. But when it comes to building wealth, one fundamental principle reigns supreme: saving. Yes, my dear readers, saving is the bedrock on which financial prosperity is built. However, and this is a crucial caveat, saving alone won’t suffice. You can only save so much before hitting a proverbial wall.

Enter stage left: making more money.

The yin to saving’s yang, making more money holds the keys to the kingdom of infinite potential upside, where the sky’s the limit. From savvy stock market investments to demanding that overdue pay rise, or heck, starting a side-hustle, the possibilities are as numerous as the stars in the sky. So, dear readers, let us break free from the shackles of limited thinking and embrace the duality of wealth-building, where saving and making more money dance together in perfect harmony, leading us one step closer to that elusive financial freedom.

7) Paying Too Much in Taxes

Ah, taxes. The unavoidable, ever-present cost that plagues our existence. The single greatest expense that haunts our financial lives, it seems. But, dear reader, there is hope! For you see, while we all must pay our fair share, there are ways to legally minimize this burden. Oh yes, the wealthy have long known the secrets of utilizing corporate structures and hiring expert advisors to slash their tax bills. But fear not, for even us mere mortals can benefit from understanding the rules and regulations that govern these matters.

Take, for instance, investing in an Isa or a Roth IRA – these investment accounts offer shelter from the dreaded taxman. And if you happen to be a solopreneur or business owner, the savings can be simply divine! Of course, some may argue that paying more taxes aligns with their values. But even for those noble souls, wouldn’t it be nice to have a greater say in where those funds go? By understanding the laws and reducing your tax bill, you can put those savings toward the causes that truly matter to you.

So, don’t fear the taxman – embrace the knowledge and take control of your financial future!

8) Waiting Too Long to Invest

How often do we find ourselves caught in the sticky web of procrastination, even when it comes to investing our hard-earned savings? It’s a common trap we must strive to avoid. For when we amass a stockpile of funds, it’s time to put that money to work for us. And how do we do that? By diversifying our investments, of course! As we navigate the ups and downs of life, we must ensure our investments can weather any financial storm that comes our way.

A word of caution, though: don’t let your precious savings linger too long in a bank account.

With inflation lurking, the value of your money dwindles every year. Instead, consider a mix of safe and riskier investments, and don’t delay in exploring different investment strategies. You see, there’s always a reason to put off investing – lack of time, not enough money, or not knowing where to start – but the longer we wait, the more challenging it becomes to attain the financial freedom we crave.

9) Not Caring About Finances

The elusive world of finances. It’s a place that many of us tend to shy away from, but truth be told, if we don’t learn to master it, it will certainly master us. It’s easy to see why some may view the pursuit of wealth as a negative thing – after all, money can’t buy happiness, right? But let’s be honest – life is largely dictated by finances. From the roof over our heads to the food in our bellies, money plays a crucial role in our day-to-day lives.

So, why not make the most of it? By immersing yourself in the world of finance, you can learn to use your money in a way that gives you the freedom and independence you crave. Whether you’re an employee, an entrepreneur, or somewhere in between, there’s a path to financial success that’s just right for you.

It’s important to remember that you don’t have to go it alone. With the right person or tools by your side, you can learn to resonate with your finances in a way that truly speaks to you. Whether you’re a risk-taker or more cautious with your investments, there’s someone out there who shares your perspective.

So, if you’re ready to take the reins and make your money work for you, start exploring the world of finance today. And if you enjoyed this guide, be sure to check out our other resources on building wealth and finding financial freedom. Thanks for tuning in!