15 Bad Money Habits You Need To Break Immediately

You know, there are some people out there that are very good at making money, but for some reason, they never managed to become rich. They work hard every day, but no matter how much they earn, money seems to just slip through their fingers. You ever wonder why? Well, the answer is by no means simple, but it has a lot to do with what we like to call bad money habits. And believe us when we say you don't want to ignore them unless you want to remain stuck in the loop that keeps most people average. So why not prevent that by watching this video? Here are 15 bad money habits that you need to break immediately.

Number one: Impulsive buying. Now, we feel like this should be at the top of the list because a lot of people are simply unaware of it. We all feel this habit creeping up every single day when we leave our houses. Impulse buying is the act of purchasing something without initially planning to do so. Imagine you're at a grocery store to buy some bread and milk; you end up with a new type of cookie that you see at the checkout. That is impulse buying: an unplanned decision to buy a product right before the purchase. It often happens because something caught your eye, or you felt a sudden urge to own that product. There are many factors that can trigger impulse buying.

One common trigger is emotional states like stress or excitement, which can make you more susceptible to making a spontaneous purchase. Other times, it's the result of effective marketing strategies, like having enticing items at the checkout line or offering limited-time discounts that create a sense of urgency. Thank you, social media and online shopping, for making impulse buying easier, with ads tailored specifically to your interests and with one-click purchases. Yes, marketing agencies have mastered the art of triggering this habit in people. And make no mistake, okay? Impulse buying can significantly affect your financial life. While a small unplanned purchase might seem harmless, if it's perpetuated, well, you're just going to end up buying a lot of unnecessary things. Then you might find yourself in a situation where you're living paycheck to paycheck or have no money in an emergency fund. Remember, if you want to achieve your financial goals, you'd better understand your own biology.

Number two: Keeping up with the Joneses. Now, this one might sound familiar to some of you, but just in case you don't know what we're referring to, keeping up with the Joneses is a phrase used to describe the desire to emulate or surpass others' lifestyles or possessions, particularly to maintain a, how should we call it, equivalent social status. For example, if your neighbor buys a new luxurious car, you might feel pressure to buy a similar or even more expensive car, even if you don't need one, just to show that you're on the same social or economic level as them. Which sounds superficial and destructive, right? Yeah, that's because it is.

The Joneses can be your friends, relatives, colleagues, or even celebrities you see on social media or TV—which we hope you don't watch too much. Okay, so what triggers it then? Well, you've certainly heard us mention this before: it's called social comparison, a natural human tendency to evaluate oneself in relation to others. This is further amplified by societal norms and advertising that push the narrative that we must constantly upgrade our lifestyle, possessions, and experiences to be happier and successful. Now, if you feel like you might be affected by this habit, you might want to take a break from social media apps and focus on your journey and process in the real world. Remember, most people are not as happy as they pretend to be, and most likely, you wouldn't want their life if you knew what's actually going on behind the scenes.

Number three: Living beyond your means. This bad money habit is the most common out there, but at the same time, it's the easiest one to fix. Now, you might say, "Alex, but how do I know if I actually am living beyond my means?" Well, it's pretty easy to figure it out. Take a piece of paper and write down all of your monthly expenses. Do your expenditures exceed your income? Your honest expenditures. If the answer is yes, well, it means that you are, and this is not advisable because it can lead to financial problems such as debt, bankruptcy, and a lack of savings for emergency or future goals. Overspending often creates a cycle where you're constantly trying to catch up with bills and expenses, leaving no room for financial growth or stability. A lack of financial security can also cause significant stress and anxiety, and these can lead to other serious health problems. A sharp awareness of where you are now in life and how much you can afford will definitely serve you well.

Number four: Paying only the minimum amount on your credit card. This feature exists as part of a service for a reason. And while only paying the minimum amount might seem like an attractive option, especially when you're short on cash, it can actually cost you a lot in the long run. And that's because, surprise, surprise, the remaining balance you didn't pay off will be subject to high interest rates. This is not some kind of benevolent free feature; it's designed to trap you. The credit card company charges this interest every month when the balance remains unpaid. So this means the longer you take to pay off your balance, the more money you end up owing because of the accumulating interest.

To make it simple, imagine you borrowed a book from a friend, but you didn't return it for a long time. As time goes by, your friend might start asking for a small fine for each day the book is overdue. Similarly, when you don't pay off your credit card balance, the bank charges you a 5% interest. Just like how that fine for the book grows every day it's overdue, the money you owe on your credit card grows every month that you don't pay it off. So if this is a habit of yours, you'd better start prioritizing paying your credit card debt as soon as possible.

Number five: Never asking for a raise. You are paid what you ask, not what you're worth. Most people really make a habit of underselling themselves at every job they get. But with this mindset, you're not going to become wealthy anytime soon. That's because in a capitalist system, you need to know how to negotiate and evaluate yourself properly. Nobody is going to give you a raise or offer you more capital or a better price for the product and services. You are the one responsible for that. And if you're afraid to do so, it means you don't have enough confidence in your skills or the product that you're selling.

But if you want to get ahead in life, then you'd better change this habit. An Alexa, on our app, we actually have a learning pack called "Building Self-Confidence from the Ground Up," where we hold your hand step by step to understand what confidence is, how our confidence grows as a child, and how we can change course as adults. If you haven't already, go to alox.com/app and start evolving your life for the better today.

Number six: Not investing. Look, saving money will never make you rich. Investing, on the other hand, can and will if you know how to make money work for you and take advantage of compound interest. When you invest money, especially over a long period of time, you have the potential to earn interest on both the money you originally put in, which is called the principal, and the interest that you've previously earned. Think of it as your money making its own money. But if you just keep your cash in a standard checking or savings account, where the interest rates are often low, your money doesn't work nearly as hard for you.

In fact, you'll actually lose money by keeping it in your savings account, and that's because the inflation rate is, in 99 cases, higher than the interest rate any bank will offer you. Seriously, it's a scam. And besides that, banks are not actually the most safe place for reference; you should see our video on the SVB collapse. Anyway, just to clarify, inflation is the rate at which the general level of prices for goods and services is rising and subsequently, purchasing power is falling. So this means over time, the money that you have today will buy less in the future.

By investing, you're seeking to grow your money at a rate that outpaces inflation, helping to ensure your money retains its purchasing power over time. But beware, okay, there are good and bad investments out there, so you'd better do your research before going all in on something. Investing in things that you don't understand is a bad idea. We'll talk about that later in the video. So if investing is not yet a habit for you, you'd better start learning everything about it right now. It's high time you let money work for you. And while we're still on the subject, there's one more type of inflation you should know about.

Number seven: Ignoring lifestyle inflation. So we've mentioned this in another video already, but in case you missed that one, here's what you need to know about this habit. Lifestyle inflation, also known as lifestyle creep, is a financial phenomenon that occurs when your standard of living improves as your disposable income rises. So it means that as you earn more, you start spending more often on non-essential items or services. So for example, if you get a raise at work, you might move into a bigger house, start eating at fancier restaurants, or buy a more expensive car. Essentially, your expenses increase proportionally—or in some extreme cases, disproportionately—with your income.

So why is this a bad habit? Well, lifestyle inflation can prevent you from reaching your long-term financial goals and achieving financial security. If you continuously increase your spending as your income grows, you might not save enough or invest enough money in your future needs. It also means that you can easily become accustomed to a more expensive way of living, which can be hard to sustain if your income suddenly drops. Moreover, it makes it more challenging to deal with unexpected expenses or emergencies as you may not have set aside enough savings. So in essence, lifestyle inflation can lead to living paycheck to paycheck even at a high income level.

Number eight: Keeping your money under the mattress. Now listen here; there's a big difference between thinking money will make you rich and having some money, an emergency fund, for unforeseen events. This bad habit that we're referring to here is having the same aim of hoarding a lot of cash, believing it will somehow make you wealthy when you turn 70 or whatever. If you're living in a developing country, you've probably heard stories of your relatives who saved money, and decades later, that money was worth nothing. We've already explained this: fix, invest, and pay attention to inflation; otherwise, the central banks will just make you poor and dissolve all the value of your decades of labor.

Number nine: Lending money to people who you know will never pay it back. Look, we know you probably don't want to hear this, but if you've made a habit of lending money to people, you know this to be true. When you lend money, it should be with the expectation it will be returned to you in full. If it's not, you're not really lending money at all; you're just giving it away. And while generosity is a good thing, it can lead to financial hardship if you're giving away more than you can afford to lose. Moreover, lending money to people who never repay you sets a bad precedent; it teaches them that they can borrow from you all they want without any consequences.

This can lead to a cycle where they keep on borrowing, knowing that they won't have to pay it back over time. This can severely damage your financial health and might even strain your relationship with the borrower. So if you want to keep your finances and your relationships healthy, it might be a good idea to quit this habit.

Number ten: Not paying your taxes. Some people learn this the hard way: don't try to cheat the government. Nobody likes to pay taxes; okay, we get it. All of us want to keep as much money as we can from the output that we're producing, but society has to function somehow, and it's via taxes. So when you don't pay your taxes, the government doesn't receive the revenue it needs to fund public services such as road repairs, schools, and healthcare. It's like sabotaging society. And while we know that this money is not often questioned the way it should be, well, there's not much to do about it right now.

Over time, unpaid taxes accumulate interest and penalties, which means you can end up owing much more than your original tax bill. Besides that, you might even get into some serious legal trouble, and that's certainly something that you would want to avoid.

Number eleven: Investing in things that you don't understand. Investing in something you don't understand is like driving in the dark without headlights. Sure, you might get lucky and reach your destination fine, but you're also more likely to hit a wall or fall into a ditch. When you invest in what you don't understand, you can make misinformed decisions based on your knowledge of the market, the product, or the industry. Without that understanding, you're essentially gambling.

So you are not investing; you could lose all of your money because of some risk factor you didn't even know existed. Hence, this is one of the worst money habits you could ever promote.

Number twelve: Not maximizing tax-advantaged accounts. So just a pro tip for those who don't like paying unnecessary taxes: tax-advantaged accounts like individual retirement accounts (IRAs), 401(k)s, and health savings accounts (HSAs) offer significant tax benefits that can help you to grow your wealth more efficiently. So, for example, contributions to traditional IRAs or 401(k)s can be deducted from your income, reducing your tax bill for the year. Meanwhile, the money in these accounts grows tax-free until you withdraw it in retirement. HSAs used for medical expenses offer triple tax advantages: contributions are tax-deductible, the money grows tax-free, and withdrawals for qualified medical expenses are also tax-free.

If you're not contributing as much as you're allowed to these accounts, or if you're not using them at all, you're essentially leaving money on the table by paying more in taxes than necessary. But remember, this is only applicable in the U.S. If you're working in other countries, you might want to consult a financial advisor to see if you can apply for a similar program.

Number thirteen: Relying on a single income stream. Relying on a single stream of income is like putting all of your eggs in one basket. If something goes wrong with that basket, oh baby, you're in trouble. If you lose your job or face an unexpected financial challenge, you'll have no other money coming in to help you cover your expenses. On the other hand, if you have multiple income streams, like a part-time job, rental income, or investments, it's like having several smaller baskets. If one basket falls, well, you've still got the other ones to support you.

This way, you spread out the risks and build a financial safety net. And besides that, you'll also have more money. There's simply no downside here.

Number fourteen: Ignoring budgeting. Ninety-nine percent of all money problems appear because people don't track their expenses and they refuse to budget. In fact, this is the very first step you should take in order to fix all of the bad money habits that you might have. You need to have a clear understanding of your finances; there's no other way around it. And if you feel like you're too lazy to do that, it's not important, or that you can simply just budget in your mind as you go, well, we've got some bad news for your friend: it's not gonna work, and it's a sign that you are not taking your financials seriously enough.

And number fifteen: Gambling and investing in get-rich-quick schemes. We'll explain this last point by quoting Naval Ravikant because he said it better than anyone ever could: there are no get-rich-quick schemes; that's just someone else getting rich off of you. This goes back to the world being an efficient place. If there is an easy way to get rich, it's already been exploited. Building wealth is a skill that takes time, effort, knowledge, and a lot of sweat. Anyone who tells you otherwise is only looking to take advantage of you.

And with that being said, Alexa, it's time to wrap up this video. These are the 15 bad money habits that we think you need to break immediately. Now we're curious to ask: what is a bad money habit that you need to break as soon as possible? Drop your answer in the comments below; we're always curious to hear your thoughts. And with that being said, it's curtains on this video. If you found it valuable, don't forget to return the favor by tipping us with a like and a share. And as always, thanks for watching. Alex, so if you'd like to learn some more, hey, check out this video next!