﻿Habits cut both ways. They can be our best friends or our worst enemies.
They help us to achieve our biggest goals or keep us tied to a toxic lifestyle.
When it comes to money, bad habits are especially detrimental. Bad money habits keep
us tied to jobs we hate. It keeps us buried under mountains of debt. And worst of all,
we will never experience the ultimate freedom that financial independence can provide.
So what are your bad money habits keeping you from reaching your ultimate potential? Hi,
if you are new to the channel, my name is Tae from Financial Tortoise - a channel dedicated
to creating Personal Finance content for the Sandwich Generation. In this video, I'll be
sharing with you five bad money habits that are keeping you from achieving your full potential
and tips on how you can break those habits. 1 - Bad Money Habit Number One | Accepting Debt
as a Normal Way of Life In grad school, I took a class where we discussed the different types of
debt. There was a spectrum where we'd line up all the different types of debt - from "good" debt to
"bad" debt. Good debts are debt that allows us to invest in ourselves so we can earn more in
the future - think college or graduate school education. Or allow us to purchase assets that
appreciate in value - think home purchase. Bad debts are the opposite. These are debts
associated with just pure consumption. Think of credit card debt, consumer loans or payday loans.
The basic concept was that as long as we stayed on the side of "good" debt and avoided "bad" debt,
then we were doing well. Most of us walked away from the class with the notion that student
loans and home mortgages were a good thing and we shouldn't feel guilty about having them. They were
a normal way of life. However, there is danger to just accepting this idea without questioning
some of the assumptions. You can see this just by observing the increasing student loan crisis in
the United States and the ridiculous home prices. The danger of accepting that debt is "ok" and is
a normal way of life makes us numb to the real danger of borrowing money. When I was sitting at
the financial aid office for my graduate school, I didn't really comprehend the amount of money I
was borrowing. I believed that "good debt" like a student loan was essentially investing in my
future, so what's the harm? However, this thought led me to borrowing more money than I needed and
my wife and I spent 3.5 years afterwards paying the price. Don't accept debt as a
normal way of life. You are essentially playing with fire and it's the easiest and quickest way
to get yourself into financial trouble. 2 - Bad Money Habit Number Two | Not Paying
Yourself First What happens after most people's pay day. They go out and spend. They spend on
necessities like rent, food and gas. But they also spend on things that they want - like going
out to eat at a new restaurant. Or buying that new shoe that’s been sitting in Amazon's shopping cart
until now. And as an afterthought, they try to save what's left over, after all the bills are
paid for and their shopping spree is complete. However, most often then not, there is no money
left to save. And they get stressed out by the fact that they can't save any money and come
next pay day, the cycle repeats. If you read any time management books, the common concept you read
throughout is the idea of 'prioritization.' If you don't prioritize your biggest, most important task
first, then there will always be other tasks that will fill your time. Brian Tracy, a time
management guru, wrote a book called "Eat That Frog." He referred to the "Frog" as the biggest,
ugliest task of the day, and if you started out the day by eating that ugly frog, then the rest
of the day would actually look pretty easy. In the same way, saving money is essentially
your "ugly frog." You know it's important, but you just don't want to do it. However,
if you don't do it first - meaning pay yourself first. You'll be paying everyone else and will
have nothing left over by the time it comes to you. If you want to get ahead financially,
then prioritize paying yourself first. Start small initially and see if you can increase it
little by little as you develop this habit. 3 - Bad Money Habit Number Three | Trying to Keep
Up With The Joneses We live in a world of social media and constant comparison.
Whenever we open instagram or facebook, we are bombarded with people who have the latest gadgets,
the coolest vacations and the nicest cars. My wife and I experienced the greatest pressure
to conform to social norms when we had kids. Having kids is probably one of the most life
transforming experiences you can have. More than getting your first job and even more than getting
married. You have this new 'being' that comes into the world that is completely dependent upon you
and your life is no longer just your life. And you also need so many new gadgets to take
care of this new being - a stroller, car seat, baby carrier, the list goes on. And of course,
the worst place to get advice on what you need is social media. But I'm not a bright guy,
so what the heck. I immediately opened up facebook and instagram and looked at what everyone else was
buying. And this, unfortunately, led me down to some dark places… When it came to a stroller,
we couldn't just get the basic model from Target - but we had to get the ultra-cool one from the
upscale store that expressed to other parents how much we loved our kid. When it came to a car seat,
we couldn't just get any old car seat - but we had to get the safest one in the world,
designed by the same engineer who built the F-22 pilot seat. And when it came to a baby
carrier. We scoffed at the parents that bought the off the rack brands and proudly displayed our
custom ordered silk and satin carrier - couldn't people see how much we loved our child? But soon,
I realized this would never end. After my proud purchase, I'd go to facebook again and would be
disheartened by the fact that Sally from down the street had upped me in all purchases and proven
that she loved her daughter more than I loved my son. I admit, it is not the proudest moment of my
life, but I learned some harsh lessons from it. Don't get caught up on the comparison game. Don't
try to keep up with the Joneses. It's a never ending cycle and your mind nor your wallet,
will find any fulfillment from it. 4 - Bad Money Habit Number Four | Not Tracking
Your Expenses Peter Drucker, the famous management consultant had a saying “What gets measured gets
managed.” Essentially, if we want to manage something better, we need a way to measure our
progress. We see this often in the health and fitness industry. If you want to lose weight,
have a food journal. If you want to improve your run time, time yourself If you want to lift more,
track your weights In the same way, if we want to improve our finances, we need to
track our expenses We need to see where we are spending our money so we can objectively see it,
and improve upon it. My wife and I use a free app called 'good budget' to track
our discretionary expenses I remember once how tracking our expenses was an
eye opening experience for us My wife is a huge coffee lover - just by the taste she can tell
what type of beans were used and the skill level of the barista We were debating the purchase of
an 'espresso' machine - one of those fancy ones that grinds the beans as well as foam the milk.
Because we tracked all the cups of coffee she purchased the past year at coffee shops, we were
able to tally up everything and see that we'd actually make our money back with the espresso
machine within 6 months, if she started making her own coffee at home. Tracking your expenses for
just one or two months will show you 'objectively' how you're spending your money. When someone asks,
how much do you spend on food every month? Most of us answer off the cuffs with a general ballpark
number. But you'd be surprised when you see the actual spending - and most often it's actually
much more than you think. Once you can see your actual spending, you can start making behavior
changes to better control your finances. 5 - Bad Habit Number Five | Putting Off
Investing Albert Einstein said this regarding compound interest “Compound interest is the
eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” Now
we all know Albert Einstein to be a smart guy - so what was it about compound interest that
he would make a statement like that? While the concept is simple, compound interest is quite
remarkable. Let's say I offered you two options One was, I'll give you one million dollars today.
Cash. In your bank. Today. The second option was, I'd give you a penny, but that penny
would double everyday for the next 30 days. Which one would you take? If you are like most people,
you'd likely take the million dollars over the compounding penny. It's millionaire dollars - cold
hard cash, compared to a penny. I mean even if the penny doubled everyday for the next 30 days,
it can't be anywhere near a millionaire dollars, right? But what if I was to tell you that in 30
days, the penny would be worth more. Far more. If you do the actual math - double one penny
for 30 days every day, you will actually end up with $5,000,000 on day 30. That is the power of
compounding. If you have time on your side, you want to start investing, so you can take advantage
of this power of compounding. Many people, whether due to fear of the market or just procrastination,
don't invest and don't invest early enough. If you are in your twenties,
this is your golden window. Piggy backing off what I mentioned earlier regarding
paying yourself first, take that money and put it into the market to start working for you. If you
aren't sure what to invest in, I have a video about index funds and VTSAX you can check out
right here. Even if you aren't in your twenties, it's never too late to start. Stop putting it
off and start investing your money so you can tap into the amazing power of compound interest.
Conclusion Good money habits are hard to develop. Unless you were taught good money habits at an
early age, most of us blundered through life making a lot of mistakes. I'm a prime example of
someone who had all the bad money habits you could think of. Accepted debt as a normal way of life?
Done it. Tried to constantly keep up with the Joneses? Been there. Put off
investing because I was too busy living life? Got the t-shirt However, I was also able to recognize
my negative habits and learned to rewire myself with better habits. If I can do it, anyone can.
Thank you guys for watching. If you found value from this video, please hit the like button,
leave a comment and subscribe to the channel so that you don't miss out on any of my other
upcoming videos. I firmly believe that being part of the Sandwich Generation doesn't have
to mean financial stress. With careful planning and preparation, we can thrive during this stage
of life. Help me spread the knowledge. Thank you again and I'll see you in my next video.