7 Money Habits That Sound Responsible But Actually Keep People Broke
Krakenimages.com | ShutterstockAs people grow into adults, they become more interested in learning how to handle their money to feel secure. They may read books about ways to become well off, but all that advice they're following can hurt them. Even if someone is following advice from experts, there are some money habits people stick to that may sound responsible but actually keep them broke.
When people have little knowledge on handling money, they may become confused by certain terms, or have additional questions but no one to ask. And that can end up setting them back significantly if they don't have the proper tools or skills to be responsible with money.
The money habits people think are responsible, but actually keep them broke
1. Staying at a low-paying job
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Some people choose to stay in low-income jobs because, at least with that job, they have a consistent salary. They might become worried about what will happen if they quit. Maybe they won't be able to find another job, or maybe they'll sink into debt if they aren't able to find a way to make money.
These fears make people think that staying at this job is responsible. Anxiety about the future can keep you stuck and continuing to make less money than you want to. It could even leave you in the same financial state that kept you from wanting to leave your job in the first place.
With inflation on the rise, the most basic salaries make it difficult to afford necessities like groceries and gas. So, you have to spend all of your money buying these items, ending up without much left to show for your hard work.
2. Focusing too intently on savings
Savings are extremely helpful if you're in a tough financial situation or have unexpected expenses like an ER visit. Many people are encouraged to put a large amount of their money into their savings, but it can also keep them unhappy and going broke if they're focusing on it too much.
People who put all of their extra money in savings miss out on the chance to invest. People who are smarter with money split their extra income between their savings and investments. Depending on the success of the investment, it could double the money they put in. If people started investing instead of only putting their money into a savings account, it could make a world of difference.
3. Avoiding debt
One of the first lessons people learn is that debt is bad, but that's not always the case. Debt, by definition, means you're giving up a portion of your money, so the key is to have "responsible debt." That means not taking out too much and making sure you pay back your loans on time. When people are responsible about handling their debts, it can boost their credit score.
A good credit score makes it easier for them to get money from a bank or even purchase a home. When a bank can see that you have a history of paying back money, they'll feel more confident giving you a loan. Because without a loan, people have to pay out-of-pocket for major expenses.
4. Buying in bulk
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People can feel pressured to buy items in bulk, even when they don't need that much of the product. Not everyone uses all of the items they bought in bulk. If you went to the store for one bag of chips, but made a bulk purchase, and after the third bag you don't want the rest, you spent more than you would have on just that one bag.
If you buy things in bulk that you normally wouldn't, it can also make your grocery list more expensive. Some people feel justified when they see their pricier receipt, telling themselves they'll have to spend less in the future. But if you don't end up using all the items you bought, you end up losing more money.
5. Purchasing big items on sale
Sales can do tricky things to our minds. It can make us excited that something we wanted but were unable to afford is now within our budget. It encourages people to buy things impulsively because they only have a certain amount of time to get the item at a discounted price. Unfortunately, buying an item just because it's on sale often leads to buyer's remorse.
People might not have the money to spare on frivolous or expensive things, so if they feel like they have to buy something now, they might ignore that they don't actually have the money to pay for it. A purchase that felt responsible at the time can make someone regret buying it because of the actual effect it has on their finances.
6. Making a restrictive budget
People who make restrictive budgets often think about how much they're willing to spend on fun activities or unnecessary items. But by sticking to a budget like this, it makes people feel like spending money on activities that bring them joy is a mistake. When you're not doing things that make you happy because of your financial state, you're going to form an unhealthy relationship with money.
Some people with tight budgets feel burnt out because of all the planning and tracking they do to make sure they're not overspending. But this can actually lead to spending more. When we buy things, it makes us happy, and feeling deprived of that can create an impulse to purchase more.
7. Paying back the minimum on credit cards
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When you take money from a bank on credit, you'll have to pay it back eventually. A bank usually charges interest on your loan and requires you to pay back more than you originally invested. Most loans also come with a plan for how much you will give back each month to successfully pay it off, but some people think only paying the exact amount each month is smart.
It seems like a good idea because you aren't taking out additional expenses in a month, but people who know how to manage their money pay off more than the owed amount each month. Only paying what you owe prolongs debt, so the faster you pay back what you owe, the fewer added fees you'll have to pay.
Lily Bell is a college student studying English and Publications who covers relationships, mental health, and personal narratives surrounding the human experience.
