9 Money Habits Keeping You Poor

What's up guys, it's Graham here. So, ever since I was a kid, I've been fascinated with the secrets of what makes somebody financially successful. To be honest, I really just wanted to figure out why some people were good with money versus why others were bad with money. As I began improving on my own financial journey, it quickly became apparent that many people are making some rather serious mistakes without even realizing it. So these are those nine mistakes, and also a big thank you to Hostinger for sponsoring this video, but more on that later.

Number one, we have lifestyle inflation. This is what happens when your spending increases right alongside your income. So, as soon as you begin making more, you start spending more. Now, most of the time, it starts off pretty innocently, like you get a raise at work, so you can finally upgrade your wardrobe or drive a slightly newer car, go to dinner a little bit more often. But that comes at a cost. I'll tell you firsthand, once you begin spending more, all of those extra little luxuries quickly become necessities, and before you know it, you need to start making even more money to pay for a more expensive lifestyle that you very quickly become accustomed to.

Now, anecdotally, when it came to myself throughout my 20s, I was very aware of this. I became hyper-focused on not inflating my lifestyle, and I made sure that my spending was in no way dictated or affected by how much money I made at the time. My entire mindset was that if I could live like I was broke throughout my 20s while working as hard as possible, I could do whatever I wanted in my 30s. And to a large extent, that came true. For more than a decade, I daily drove a used Toyota Prius. I never lived in anything more luxurious than an 800 square foot duplex in the mid-city of Los Angeles. I saved at any chance I got, and now everything that I buy is sustained indefinitely by those sacrifices. So I would say, instead of spending more money, do your best to keep your expenses as low as possible, and then save the difference.

Number two, not tracking your expenses. If there's one difference that I've noticed between people who have money and people who don't, it's that one of them is more likely to stick with a budget, and I bet you could guess which one that is. Look, the sad reality is that the average American is spending eighteen thousand dollars a year on non-essential items and 300 a month on random impulsive purchases. To be honest, that should not be happening if you're not already in the financial position you want and deserve to be in. Flat out, the people who don't properly manage their money never track their finances. And if you're currently struggling with money right now and not already doing this, you should begin doing it immediately. Consider this almost like your financial check engine light; doing this is going to tell you exactly what's wrong so that you can look into it further.

Most people just completely ignore that financial check engine light, and they have no idea how much money they spend or where. This is not how wealthy people manage their money. So if you want to make a change, track your income and expenses for the next 60 days down to the penny using a free service like Mint, Personal Capital, or Rocket Money. From there, you could better determine if you're spending money on things that don't matter, if you're making reckless impulsive purchases, or if you're otherwise wasting money on things that don't really make a difference. Doing this is so important that if you could just stick with it for two months, I guarantee, I promise, you're going to be shocked at how much money you save.

Number three, borrowing the maximum that you can afford. Look, anytime you apply for a loan, it's the lender's job to get you as large of a credit line as possible. They are financially incentivized to stretch out your monthly payments as long as possible just to be able to increase your budget a little bit more. But I'll tell you, just because you could qualify for something does not make it a financially good deal. The truth is, what you qualify for and what you could actually afford are two entirely separate equations. And when it comes to your lifestyle, you should never spend the maximum just because you can. Like, just take a look at everyday expenses. The average car is now financed at 716 dollars a month, the average house is mortgaged at three thousand forty-eight dollars a month, and the average person has access to thirty thousand dollars in credit across their cards. All of that is just a recipe for disaster.

Instead, I've always taken the approach that you should first come up with a budget in terms of what you feel comfortable spending and then stick with it, regardless of how much a bank is willing to lend to you. For instance, when it came to myself, I was approved to buy a one and a half million dollar home, but instead I spent six hundred thousand dollars on a fixer-upper in a not-so-good part of town. More recently, I bought my current home for 1.4 million dollars when I was approved to buy something up to six million dollars. Oftentimes, it's better to spend less, save more, and long-term, you're not going to be burdened with high monthly payments if something were to happen.

Number four, not having a good understanding of taxes. Here in the United States, the average single worker pays 30.5 percent of their income to taxes, meaning one-third of your entire working year is spent just to earn enough to pay the IRS. That means it's more important now than ever to at least have a basic understanding of how the tax system works so that you could utilize every resource at your disposal to keep and save more money. Most of these, unfortunately, are never taught in school. No one ever tells you to do anything about it, and generally, people just accept that taxes are as inevitable as death, which is true, but there are ways to at least make it a little less painful.

For example, if you're working a typical nine to five job, see if your employer offers a 401(k), which can reduce your taxable income by the amount that you invest. We're looking to tax-loss harvesting your losing investments at the end of the year so that you could offset up to three thousand dollars from your paycheck. Or if you're on a business, it might make sense to run that through an LLC or an S corporation so that you could reduce your self-employment tax. There's so many different strategies out there that you could legally utilize to keep more money in your pocket, and a lot of that comes down to your understanding of the tax system or hiring a professional who does.

Number five, ignoring retirement accounts. I guess since we're on the topic of taxes, it makes sense that we talk about this one here because there can be some serious money to be made. Just like the law allows you to legally reduce your tax bill, it also offers you financial incentives if you invest, and three of them are fairly easy for almost anybody to do. The first is a Roth IRA that allows you to contribute up to six thousand five hundred dollars a year, and all the profit you make within that account is completely tax-free at the age of 59 and a half. Second, you can also look into investing within a traditional 401(k), which allows you to contribute up to twenty-two thousand five hundred dollars a year. Like I mentioned earlier, this is a retirement account that you could invest pre-tax money into, and then you're taxed later on the money after the age of 59 and a half.

And third, you could look into investing within an HSA, which stands for a Health Savings Account. Essentially, this is used for medical expenses, and both contributions, profits, and withdrawals are completely tax-free. Now, there are some qualifications for this, and a quick Google search will tell you whether or not you're eligible, but if you are, you could invest another three thousand eight hundred and fifty dollars a year. This means just between those three options, you could potentially invest and shelter up to thirty-two thousand eight hundred and fifty dollars a year in income without doing anything fancy.

Number six, not having more than one source of income. This one is actually so important that the IRS issued a report on high income tax returns and what they call the distribution of economic well-being, which basically means they want to figure out why certain people make so much money. What they found is that the more income sources you have, the more money you tend to make. In fact, when it comes to this, 65 percent of millionaires have at least three sources of income, so you are doing yourself a disservice if you're not actively working on something on the side to bring in some more money. This is also going to dramatically help you build more wealth since an extra income source should, in essence, be extra, which would allow you to save the difference and invest.

Now, as far as how you could do this, besides working a part-time job on evenings and weekends, you could consider starting a business. Now, sure, a lot of new businesses do end up failing, but with the internet, there's never been a more level playing field when it comes to building wealth. You can now run a multi-million dollar business right from your laptop, from home, anywhere in the world, without buying any inventory or without hiring any employees. Even this YouTube channel, which has made millions of dollars, is something that I primarily do from home with some pretty basic equipment.

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Point being, when it comes to starting a business, the options are limitless, and the more income sources you have, the more you have to fall back on just in case something were to happen. Now next, number seven, it's bad to be too cheap in the wrong places. I'm gonna come clean here, but there's a difference between being frugal and being cheap. For a long time, I was cheap. I would always pick the least expensive options. I would try to save as much money as I could, and I later came to find out that that wasn't always the best option.

For example, I hired a cheap accountant who, at first, I thought was really good until I found mistake after mistake after mistake. And once those mistakes cost me more than I should have just spent hiring someone good, I switched. I've also made the mistake of buying cheap electronics, thinking I'm saving money, only to find out that they break and need to be replaced for a lot more than it would have cost to just buy the right thing from the very beginning. You know, when it comes to this, there is something called the boots theory, which suggests that a rich person is able to afford the more expensive boots that last a lifetime while the poor person is forced to choose the option that costs less money up front but costs more long term because they constantly need to be replaced. That I think really applies here. In those situations, quality matters. If you're gonna spend your money, make sure it's the smart financial move long-term.

Number eight, not planning for the worst. Look, rainy days happen when you least expect them, and it's important to plan for a time where things don't go your way. As sad as it might be to say, your job is probably not going to last forever. Your car is going to break down when you least expect it. A natural disaster could completely tear apart your home, or an illness could throw all of your plans out the window. Now that's not to say that you should live your life around getting bit by a shark after your car breaks down while you were driving back from the hospital to treat a rare illness after getting fired, but it is to say that you should have a plan in place just in case one of those or two of them were to happen at the same time.

In this case, save enough on the side to make sure that if you lose your job, you'll be okay for the next three to six months. Make sure you have the proper home insurance to make sure you're covered in the event of a disaster. Go and get regular checkups so that if something were to happen, at least you could catch it early, and spend money maintaining your cars so that it'll last another 100,000 miles. All of these things can proactively help you in the long run so that that way you're financially prepared for anything that comes your way, including Carole Baskin.

And finally, number nine, is not having a plan. Think of it this way: when you go on a road trip, you know your final destination and you have a map that's showing you exactly how to get there. But when it comes to someone's life or finances, most people just wing it and hope that eventually they end up where they want to be. Unfortunately, though, life never really works that way, and unless you have a plan, you're probably not going to achieve it. This means figuring out what you want to be doing, how much money you'll realistically need to save, and where your priorities are.

I think most people would be shocked to learn that they don't need tens of millions of dollars to live the life they think they want. And they haven't come to terms with the fact that they don't want to run a multi-billion dollar global empire. Just carefully think about exactly what you want to do throughout the day and how much that's realistically going to cost. Then, work backwards to figure out exactly how you can achieve that. For example, a waterfront home in Florida could be a million dollars, home furnishings could be another fifty thousand dollars, a used Ferrari could be a hundred and fifty thousand dollars, and six thousand dollars a year in maintenance. Going out to restaurants is another two thousand dollars a month. Maybe spend two thousand dollars a month on hobbies and another two thousand dollars a month on miscellaneous stuff.

All in, you would be able to buy that lifestyle for 1.2 million dollars in one-time costs and one million nine hundred and fifty thousand dollars invested. Though, even though that might seem like a lot of money, you could get there by investing twenty-four thousand dollars a year at an eight percent return over the next 30 years. Essentially, that's just you maxing out your 401(k) throughout your entire career, and voila, you got that retirement now for the rest of your life. So if you haven't already done the math, add it up because I promise you're probably not going to get there unless you know exactly where the destination is.

So with that said, you guys, thank you so much for watching! I really appreciate it. As always, feel free to add me on Instagram. And don't forget that you can also get a free stock with all the way up to a thousand dollars with our sponsor, Puppet.com, down below in the description when you make a deposit with a good gram. Enjoy! Thank you so much, and until next time!