What if I tell you that it is your habits and not the economy, your job or even your background that is to blame for your terrible financial status? That sounds crazy, right? Well crazy as it is, it actually is the truth.
Let’s face it-many employed people are living from paycheck to paycheck, a system that is not only limiting, but also exhausting. According to the international labor organization (ILO) approximately 80% of employed Kenyans are classified as working poor.
Maybe you fit in this class and you feel overwhelmed. You are stressed up watching your goals and dreams shrink and die. Yes, you may pretend to be doing fine, but you know that you are not and that you need help.
The good news is that your help is right here. We have explored 7 habits that are keeping you poor and given a guideline to help you break them. Read to the end to discover ways that will help you break them and start your journey to wealth.
Habit #1: Spending money without a budget
One sure way of making you poor fast, is trying to show the world that you are rich. Buying expensive stuff that you don’t need mostly on credit to fit in makes you unnecessarily indebted. The Credit card culture and impulse spending make you think you have money that you don’t. You end up spending much more than you can afford to pay back. So you borrow afresh to pay earlier debts creating a vicious cycle.
I was a victim of the debt cycle because I never used to budget my expenses. The painful part is that most of the unnecessary expenses benefitted other people, often strangers who never really needed my help. When I started budgeting, I realized that I could live without debts on any amount of money whether much or less.
Start working with a budget in all your activities. Don’t buy that attractive pair of shoes, or electronic gadget until you have budgeted for it to curb impulse purchases. Break the budget to clearly show needs and wants. Always allocate the needs money before the wants. Use the 50/30/20 rule; allocate 50% of your money to needs 30% to wants and 20% to savings
Habit #2: No Emergency Fund
I came to appreciate the importance of saving money for emergencies when my dad got sick 2 years ago and had to be admitted to hospital. My siblings and I needed to contribute money to clear his hospital bill after his insurance was exhausted. Since the amount needed was huge, I was forced to borrow some money from a shylock to make payment. This threw me deeper into an expensive debt that cost me a whole year to repay.
You need to build up an emergency fund for such unexpected expenses. Stuff happens and we often find ourselves in the middle of it. An accident can occur, an illness or a job termination. During these tough times, the emergency kitty comes to your aid.
Save an equivalent amount to your six months income in a current account or asset like a money market fund. The idea is, save your money somewhere you can easily access it when need arises. Note, you need separate accounts for the emergency fund and other savings (for investment or other future planned expenditure)
Saving money may be difficult at first but as you go on, you soon find a hack of it and it flows onward. Start making small regular savings for example $1 a day and you will see your fund grow.
Habit #3: Not Investing Early
One important life hack that you were probably not taught in school, is investing early. Time is your biggest money multiplier and as such, an asset that you should take advantage of. Don’t wait to invest later.
Start now. Let me tell you an open secret, you will never feel ready enough to start saving money and investing. There will never be a perfect time, just start small and start now. The best time to start investing is yesterday. The second best time is now. There are simple apps that can help you start investing as little as $1. Leverage them and start making profits however small.
A good reason why you need to do early investment is to take advantage of the power of interest. Compounded interest over time will earn you unbelievably huge returns on your investment. According to Albert Einstein, compound interest is the 8th wonder of the world. Take advantage of it to see the magic.
Another reason to start investing early is risk tolerance. A young investor has more time than their older counterparts when considering the time factor. In case of a setback, the younger investor has more time to recover than the older one.
Habit #4: Relying on One Source of Income
Relying on only one source of income is a very risky affair, because, if it dries up, it leaves you financially vulnerable. Secondly, if you depend on only one stream of income, you are limited in growth. It caps your earning potential giving you very little room to create wealth. You may also be missing out on opportunities to learn and perfect profitable skills needed to earn more money.
To grow wealth you need to break free from this trap and diversify. Identify a side hustle you can do to generate more income, expand your growth and create wealth. This will not only be a backup plan in case your main source of income fails, but will earn you money to invest further to hasten your journey to financial freedom.
Explore online opportunities to make money. Your skills are a great asset. You can create courses, learn and practice online freelance writing virtual assistance mong others. You can make videos for money on Youtube and other social media platforms. Other side businesses like farming and livestock keeping can be handy in helping you achieve your financial goals.
Habit #5: Ignoring Financial Education
Another reason you are lagging behind financially is that, like most people, you probably stopped learning the moment you stepped out of school. It is even worse because financial education is barely taught in school. That means that you are possibly operating in trial and error mode without clear guidance on the path you need to follow in relation to your money and you.
Here is what you need to do;
Make it your habit to read at least one book on finance each month. This will not only equip you with financial awareness. You will identify where your money goes and how to manage it, and learn various secrets to help you achieve financial freedom
Follow YouTube finance channels to get free coaching for your money goals. You tube videos will boost your motivation when you watch other people’s experiences. They will also keep you updated on new tools, strategies and opportunities plus real life tips to help you make the best financial moves.
Take a finance course to gain money skills, boost your confidence, help you to avoid expensive money mistakes and increase your ability to earn money
In A Nutshell
Poverty is not always caused by lack of opportunity- sometimes; it is due to poor routines that we have embraced for too long. The five habits you have just explored are not only bad financial moves, but also mental traps that have grown into comfort zones and normal behavior. But there is good news. Habits can be broken and better ones can be built.
You don’t have to wait for the perfect time to change your life. The shift starts now- with awareness, intention and one better decision at a time. Choose discipline over impulse and growth over comfort.
Since staying poor is a habit, so is becoming wealthy. Which one do you choose?