8 Habits that will make you Poor in fastest possible way
There is a lot of information available in public on- “How to become RICH” but there is rarely any discussion on “How to be Poor”. Obviously, no one wants to be poor or remain poor, so in this article we will see the Habits that will NEVER make you RICH or in other words these habits will drag you down to poor. I have already discussed- How to be RICH you can read here- “10 Golden rules you must follow if you want to be RICH fast”. There are 8 Habits which have potential to make you poor, out of which if you possess even one then it’s high time to renunciate that habit right away. More no. of these habits you have, chances of getting poor increases; so you need to avoid these habits. Let’s discuss these habits in detail-
- Spending your whole salary: Your salary is your capital. Spending and paying off debt with whole salary snatches the opportunity to invest. You are securing your present but not your future. God forbid, if your salary stops due to any reason like you got critically ill or recession/job losses in your industry or any external uncertainty etc. what will you do at that time. At that time, your savings can be your saviour. Never ever spend your whole salary, make up your mind that you are earning 80% of your actual salary and atleast 20% (more allocation is always welcomed) should get allotted to your savings, no matter what happen.
- Indulging in Consumer Debt and EMIs: Consumer debt is a debt taken to purchase anything which you are consuming like Car loan, Home loan, loan for any electronic item, personal loan etc. The consumer debt in personal finance terms is your bad debt; it costs you more than you think. Just calculate your annual interest (rate x total debt balance) and see how much you are paying. Consumer debt means paying more for a thing than its original cost. Consumer debts and EMIs ruining your capital and most importantly they are ruining your peace of mind and if you don’t have peace of mind, you cannot think of your growth. Consumer debt impacts you with double edged sword. Avoid consumer debt and EMIs; it is biggest hindrance in your personal and financial growth.
- Relying on one income stream: If you think having one income stream is normal, you are WRONG. The increasing inflation and uncertainties around, one income stream is not enough. You should start thinking of any side hustle in which you are good. After internet revolution many jobs and business are operating online. You should start thinking of another income stream by investing time which you get after your main job/business. It will makes you financially secure and it also make sure that if any uncertainty comes in your way, you have another source to rely on and then gradually build up again.
- Spending too much in Luxuries: RICH people focus on investments and ideas while POOR people focus on appearing like RICH. Your aim is- to become RICH, not to appear like rich. There is no harm on spending in Luxuries but you should do it only if you can afford it. For simplicity you can cap that you will not spend more than 30% of your annual salary per year. If you like to spend on luxuries- first upskill yourself and increase you earnings then spend on luxuries that too not more than 30% of your income.
- Trading in depreciating assets: Depreciating assets are those which you purchase and after that its value starts going down, whether you use it or not. Cars, laptops, mobiles phones are some examples of depreciating assets. Many people have hobby of changing cars or mobile phones after some time and buying a new one, that’s the Trading in depreciating assets. Trading in your car every 2-4 years or mobile phones in every 6-8 months costs you a lot. The vast majority do not retain their value. You’re throwing away this money quickly. Find a reliable asset instead, the one you can keep for long time.
- No plan for Savings: When you get your paycheck the amount of savings should be taken out on that day itself. If you don’t have any plan for your savings and you never include it your monthly budget; it is alarming. Save first then Spend the rest, it should be your way; not the other way round i.e. Spending first and whatever left you Save it. Make a proper planning how you can include your savings in your monthly budget and strictly stick to it. Ideally you should save more than 20% of your in-hand salary.
- Never consider Investment as an option: It is true that if you don’t invest and you keep earning and somehow save some, you will not get Poor (if some uncertainty does not encounter). But it’s equally true that if don’t invest in right Assets you will not become RICH. If you started saving but confuse where to invest it, this article tells you to invest in appreciating assets- “11 Assets that can make you RICH”. You can’t become Rich with your own labour. For that your money needs to work for you. Invest in appreciating assets wisely.
- Never thinks about Financial planning: When you save and invest, you need to go beyond this. You should now have to make proper financial planning as per your risk profile. There you should be a plan for your growth, increasing your income, your emergencies and other uncertainties. For that you need to know basics for Personal Finance, you can read here – “10 must know Basics of Personal Finance for everyone”. If you had not started financial planning, start it as soon as possible.
These 8 habits mentioned above should not be possessed but unfortunately they are very common among the masses. If you also possess any of the 8 or all 8 habits, it is high time to renunciate it today. Once you reject all these 8 habits, you put the stepping stone towards your financially better future.