7 Money Habits That Can Make or Break You
7 Money Habits That Can Make or Break You
Credit.com Yahoo! Finance/Thinkstock - Todd Tresidder
Why do you keep buying things you can’t afford? It makes no sense: it’s not rational. Nobody wants to be in debt. The answer is simple: debt problems are emotional, not rational. Debt results from unconscious habits and attitudes that cause you to spend more than you can afford.
In other words, everyone knows the first law of finance is to spend less than you make. That is how you stay out of debt. Unfortunately, knowing what to do and actually getting it done are two different issues.
That’s why being on the right side of these seven financial practices is critically important to your financial success. They can close the gap between knowing what to do and actually getting it done – simply by changing your daily habits. It is the easiest way to solve your debt problems and begin building wealth.
The good news is this means you have the power to improve your financial situation no matter where you are at today. You created your habits, and your habits produce your long-term financial results. That means you’re in charge and have the power to make positive changes.
Consider the following seven financial practices that can take you to debt or wealth. The habits you choose will determine your financial success or failure.
1. Emotional Spending
Here is a simple test to determine if you’re an emotional spender:
Do you use shopping to relieve stress or escape boredom?
Do you use shopping as a pick-me-up or entertainment?
Do you celebrate by shopping for a treat?
Do you ever shop as a form of “retail therapy?”
Do you use shopping for social connection?
Do you have clothes in the closet with the tags still attached?
Do you have more than one of the same item?
Is your credit card bill so large that you can’t afford to pay it off at the end of the month?
Do you ever feel an endorphin rush when making a purchase?
Do you experience anxiety, guilt, or remorse after shopping?
Do you ever hide purchases from friends or loved ones?
If you answered “yes” to one or more of these questions, then you might have an emotional spending problem.
Emotional shoppers become addicted to the temporary endorphin high that comes from buying. You’re genetically programmed to pursue what makes you feel good, turning spending into a physiological habit like a drug. That’s why excessive spending is about the emotional experience from buying stuff and not the stuff itself.
The purchase brings temporary yet immediate gratification (even if it causes debt).
The wealthy habit is to spend based on needs — not wants — and to plan purchases rather than buy spontaneously. A good habit for breaking emotional spending is to force a two-day cool-off period for all non-planned purchases so your emotions can settle down. If you still want it after two days then it may actually be worth buying.
2. Addiction
Closely related to emotional spending is addiction, but this can be an addiction of any kind — not just shopping. Gambling, drug and sex addictions are highly destructive — both financially and otherwise. The ensuing debt spiral may be the least of your worries but is often a consequence.
The wealthy habit is to avoid all forms of addictive behavior and live in balance — admittedly easier said than done. If you face addiction issues, the solutions are beyond the scope of this article. Seek professional help and consider one of the 12-step “Anonymous” programs tailored to your specific addiction.
3. Entitlement
Entitlement thinking is the belief that you magically deserve all the good things in life regardless of what your financial statement says. After all, why shouldn’t you have designer clothes, a big-screen TV, pedicures and a new car? Everyone else does, right?
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