Financial Mistakes That Will Keep YOU poor, broke & Their Remedies

The usual suspects: gluttony, greed, drugs, etc. Doesn’t matter if you win the lottery, if you can’t manage your lifestyle and tell people NO, you will be broke very quickly. Most lottery winners go bankrupt in a few years.

What can you do to avoid these pitfalls?

The system of money is designed to keep people needy and poor. So the first mistake is to not make any effort to understand how money actually comes into existence and is employed to keep you in your place.

Take your time and effort to learn about money.

Below are some mistakes that people make that You can learn from on how you can do that:

A. BUYING LIABILITIES

1. BUYING CARS

Spending loads of money on depreciating assets, like most cars, and not on assets that appreciate:

Cars are the biggest debt trap you will ever come across.

People who can barely pay their bills will have a car payment for several hundred dollars per month.

While there’s nothing wrong with buying a car, even if you need to finance it. But your car shouldn’t cost more than 10% of your gross income.

Consumers often think they should splurge on an expensive car just because they can afford the payments at that time. A year or two later, they’re struggling — in part because of that huge car payment — and they can’t even sell the car without taking a loss.

There’s no need to spend a lot of money you don’t have when all you need is some wheels and engine and seats and a trunk to go down to K-Mart to buy groceries.

So, buy a quality used car and look after it.

Stop buying things that you don’t need, but others have, for vanity’s sake.

2. FINDING WAYS TO GET A CHEAPER HOUSE: Since everyone needs a roof over their heads housing is usually the biggest expense of their life so do not follow the herd on this one. Buy a house that will appreciate in value over time. A cheap house that is not in good condition is cheap but needs fixing is good too.

3.This 👉👉👉Your well-to-do friends are popular. They have the nicest clothes, the newest iPhone, etc. They’re considered “middle class” but every dime earned is spent that way. Their parents might make a combined $120,000. Their kids don’t go to many events unless their mother is a housewife and has the time.

They spend every free available dollar on expensive purchases and have a nice home. But are they rich? I don’t think so. They’re quite focused on maintaining their rich lifestyle, but maintain all of their income as debt owed to others.

Their monthly income would be $10,000, taxed out to $7,500. They spend every yearly tax return as soon as they get it to upgrade all of their stuff to the next level, or as down payments to be then leashed to another monthly payment. But their mortgage is $1,500, their car payments and insurance and gas bills come out to $2,500. If they have a boat add another $1,000 a month. They probably spend $750 a month on food, $250 on utilities, and another $750 on their phone bill with Verizon. That leaves $750 a month ‘extra’. But they spend it on lawn care, childcare, and other things that they don’t have time to do because they’re so busy maintaining their debt lifestyle.

So, they may make a lot of money, and have a lot of nice things, but they have little to no net value because their investments (except the nice house) all depreciate, and any new money goes to upgrading their cars, house, and electronics. So, they stay in a permanent state of owning as much money as they make for vanity.

If they chose cheaper options, they could easily save up and have their money work for them, have cheaper phones and plans ~$1,000/yr to operate, use other’s boats, cheaper cars, preferably paid off entirely at purchase so that the bill is gas and maintenance at most. And make vanity purchases at cost, or search for good deals and trade to have better stuff, and not pay interest and have a huge problem if one of them is injured or sick.

But there’s a problem at the root of it all, and it’s that Money =/= happiness, and having nice stuff doesn’t either. Spending all your time working means that you can’t even enjoy the things you’ve worked for that you don’t fully own. There’s a mindset though that to have a nice life, you have to be living the American Dream, which consists of being in huge amounts of debt in the pursuit of vanity.

3. Stuff that is going to make your life into some fantasy dream World right out of the box. Well, it won’t because stuff does not make your World you do, and cluttering it up with expensive stuff just drags you down and makes you miserable when you realize it is just useless tat.

4. If you have to borrow some money, just make sure it is at a competitive price and will be spent on something that will go up in value or not decrease. Though this general first principles guide and does not cover, jobs, business, and saving/investing but trust me if you cannot sort the above no amount of dicking about down the road will ever sort things out.

5. Don’t be a walking billboard for free. Did you buy that shirt because it’s super comfortable and made of quality materials, or did you buy it because it says Tommy Hilfiger in 4-inch letters across it? This also goes for tattoos. $1000 for what? Something that gives away information about yourself that will look like crap in a few years.

6. Jewelry is similar to the first point. Wearing your money is an invitation for theft and beggars. It’s also wasteful and useless. Style is overrated.

B. INVESTING & SAVING

7. Not creating an emergency fund.

An emergency fund is the first step one must take toward financial planning. Emergency funds mean saving or investing your 6 to 12 months of expenses in liquid assets, which can be helpful at the time of any crisis situation

8. Not starting to invest early.

People usually start investing after they start a family or after they are in their mid-forties. The correct age to start investing is as soon as you start earning. This will make your later years financially very smooth.

9.Not investing according to their goals.

Always create your investment portfolio according to your goals. Classify your financial goals into short term and long-term goals and start investing for each goal. Once the money invested and returns are sufficient for fulfilling your goal, you can redeem the investment for realizing your goals like buying a house.

10.Trying to time the market.

All the investors wish to time the market and buy the stocks when it is at its lowest and sell at highest. But the entire market, including stock prices, are governed by various factors that one cannot contemplate beforehand. You never know if the current low is the lowest or there is a possibility of further lows and vice versa. A better way is to have a financial goal and invest to meet the goal. One can use diversifying and rebalancing the portfolio to manage the market risk and maximize the returns.

11.Avoiding to invest does not mean preventing the risk

As investing is risky, so as not investing. You might lose money in stock when the markets are falling, but thinking to avoid investing is another kind of risk. It is like avoiding alcohol for a healthy body but living a sedentary lifestyle for years. You are trying to prevent one habit that triggers health issues, but on the other hand, you are not living an active lifestyle, i.e., in this case, your money. Hence one should make a balanced portfolio consisting of equity, debts, government bonds, gold, fixed deposits etc. A balanced portfolio will help to create wealth and also minimize your risk.

12.Saving rather than investing. This is especially risky in countries where the exchange rate and inflation risks are huge. Plenty of people have been wiped out by this in the past.

Ultimately, wealth and income aren’t the same. Cashflow is also kind, as is potential liquidity for a portion of your assets in an emergency.

Therefore, if somebody is worth $5m on paper, but it is all tied up in illiquid assets, that isn’t the same as having $5m in a liquid ETF portfolio.

Likewise, if somebody is making $500,000 a year but is spending $500,000 each year, that isn’t the same thing as earning $70,000 and spending $50,000.

In fact, it makes that person poor in many ways, even though general society would think they are rich as they are earning 500k.

Yet in reality, they are just living pay cheque to pay cheque. Any unexpected event, like ill health, could put them on the breadline.

13.Pay yourself first – SAVE MONEY.

What do you do with the savings? If they are modest consider opening a small business with them. In short you are investing your money into something that will earn extra money.

If you actually have a decent job, say a nursing aide, or x-ray/imaging technician, put your savings into financial products FOR THE LONG TERM.

I’m a compulsive person. I LOVE trading. I’ve probably made every trading mistake you can possibly make, and I’ve made most of them twice. I’ve been trading since high school.

But you have to view trading as a job, not a thrill. Which means you have to have a profit at the end of every week and month. AND that profit has to go into long term savings.

C. LACK OF FINANCIAL KNOWLEDGE/FINANCIAL LITERACY

14. Not taking risks seriously. Things happen in life. Yet many people will still put close to 100% of their eggs in one basket like a company, a home, or just one stock.

15.Not being liquid enough. If all your assets are in a home or business, it is riskier than if you have assets in the stock markets through ETFs or other vehicles.

16.Debt

can be useful (good debt) but in the main it is a hungry monster that will eat you alive and keep you broke for the rest of your life.

Debt should be availed only to the extent you are sure to repay. As an investor, one should be cautious regarding the debt one can undertake, even if the banks and financial institutions are ready to offer you.

Getting into credit card debt. Not all debt is bad all of the time. Almost every successful business has used it. Yet credit card and consumer debt is very dangerous

17.Carrying balances on your credit cards

While carrying a balance on a credit card doesn’t seem like a big deal at first, it can quickly spiral out of control. Before you know it, you owe $4,000 on your Chase card, $3,000 on your American Express, $1,200 on your Nordstrom card, and so on. The smartest way to use a credit card is to be a “transactor.” Use your cards for the security and rewards they offer, but never carry a balance.

18.Withdrawing retirement funds early

Some people see their retirement account as money they can tap into when they want some extra cash, but that’s a bad way to look at it.

Depending on the type of retirement account you have, you may need to pay penalties and income tax on the amount you withdraw.

And remember: One of the main benefits of retirement accounts is they allow your money to compound and grow much larger. When you withdraw money, you’re taking a step backwards.

19.Your job being your only source of income

People who get ahead in life do it by having multiple sources of income. Besides a job they will have a side hustle. Said side hustle does two things. One, of course, it gives extra income. But two, it keeps you busy so you are not spending money.

Besides that, the smart ones buy rental property or otherwise invest for income. And besides that, they will be active in selling and flipping things on craigslist or eBay. They might sell scrap. They are always looking for a few extra bucks.

Donnie Bracco explained it well. Even though he was talking crimes, the lesson still works. He said most guys in the mafia do not have one big scam, they have a bunch of smaller ones. They might have 20 scams making $100–200 a week each, but the key is that adds to $2000 a week.

So, you might have a side hustle makes you $4–5000 a year. You might get a rental property that throws off $250 a month. You might both scrap as well as sell things for another $100 a month. But see what is happening? Soon you get another $10,000 a year. Then you grow that.

But too many people never bother trying. They might make $100 once and decide it was too much work. But it all leads to things. My side hustle working for someone led to another where I work for myself which is putting me in contact with people that will eventually probably need other things.

It is a mindset.

20.Lack of knowledge

Lack of investing knowledge, which leads to a lack of investment.

Investment doesn’t have to be cash either, it can be books, self-education is the most powerful way we can grow our ability to earn, and the when we are earning and learning one key is regular savings and investing.

Long term wealth comes through knowledge, whatever form that education takes, often google, books, videos, they can all lead us to greater awareness.

I’ll give you some examples,

Supposing I’m poor, and I stay in my poor neighborhood and keep busy with culture and whatever other distractions people do there. I’ll be very likely to stay poor!

Supposing I’m poor, but upwardly mobile! I get on a bus or move to a different area, I work and make some friends, and all of a sudden, my environment and my opportunities begin to change.

There are guys in Silicon Valley, with very different focus than people in uneducated areas. They have exposure to incredible technology, ideas, and wealth generating opportunities.

It might even be as small as $100 into bitcoin back in 2009 that made millionaires today. It wasn’t a lot of money they needed; it was knowledge. Some people understood!

Today there’s enough knowledge online to make wealth.

We just need to grab ahold of it, and learn, then take correct action.

My example of crypto is a big one in today’s world, because it opens doors to the biggest financial revolution in world history. There are opportunities hidden within for ordinary people too. They can take a poor person to the heights of wealth, and often do.

There are numerous examples of projects for normal people. A couple of correct decisions now, and your whole life can change over the next few years. If a family or group can together manage to get a few hundred dollars? They can get started and begin gaining wealth in the technology revolution. This is a doorway to success. Regular savings and investing are how many people start small and build up over time.

We all have choices, and decisions to make, learning and gaining knowledge leads to understanding and is the best way to make the right choices to reach success. Motivation is critical too, to realize we are empowered by our mindset, to take control our lives.

So always keep learning and use google to its best advantage, it’s very powerful! Knowledge is real wealth, it improves life, makes it interesting and helps others around us to be empowered too!

21.A lack of any sort of budget.

PAST: I really don’t have a proper budget, just a vague idea of where I want money to go after bills and such. But at least I can pretend to know where my money is going.

I am part of a local needs group on the old’ Facebook. You see requests for different needs: food, clothing, household supplies, etc.

One gal and her husband didn’t even have bed stuff. Their story was they had been moving from relative to relative and had finally secured their own place. But they had no sheets, blankets, or dishes.

Well, I had some dishes I could give to them. I let them know, they were grateful, though also asked if I could keep an eye out for sheets and blankets. I drove over to their home to drop off the dishes.

And noticed they had quite a few cigarette packs.

I am not going to fuss about smoking, but it is an expensive habit. I wanted so much to tell them, not to quit, but maybe cut down for a short time and use that money to buy a cheap fitted sheet and blanket from the nearby thrift store.

Another smoking tale: I worked at an office where one of the guys was a church bishop, lay ministry. One of his things was to financially assist people in need. He once let it slip, he was dealing with a couple where he was pulling church funds to pay for everything: mortgage, utilities, etc. He knew they were smokers, and finally say down with them and asked just how much they were spending on cigarettes each month.

It turned out to be over $2000. A month.

Two example of people who were destitute because they couldn’t figure out how to set aside money for necessities.

PRESENT: I have a budget and write down everything I spend, also try and give financial advice to anyone who needs it, like the ones mentioned above.

22.Consume less than you take home.

This is hard to do, and very hard in different places where you are inundated with encouragement to consume. It is also hard to do if you if your line of work doesn’t pay well. But the excess of take-home minus living costs is savings.

If you look at new immigrants from poorer countries to rich countries, they typically manage to do two things a lot of poor folks don’t do. One is they save money, and two is they open a small business. Often their businesses are a real grind too. Convenience stores, hair dressing, etc. That’s why they open them, most folks in those rich countries thinks , “Ugh. Too much work.”

23.I view personal finance as a component of one’s overall fitness. It’s not as direct as our genetics, diet, or exercise routines, but can be categorized as a behavioral and social component of one’s overall wellbeing.

Plenty of research show eating too much fat has been linked to heart disease. In a similar way, many epidemiology studies have shown that lower social economic status is associated with lower lifespans, increased health problems, increased risk of mental illness, and increased risk of violence and food insecurity.

But unlike heart disease, for which our society has developed treatments for and made readily available, many countries don’t have any adequate social safety nets to prevent poverty (example: most people who rely on govt funds for living as their sole means of income will live below the income poverty line).

This is the reality that most of us face. Yet how we respond to it is a huge controllable determinant of who becomes wealthy and who stays poor.

Having been poor myself once upon a time, I found the following tendencies to be true in response to the reality above:
It was easier to blame one’s financial shortcomings on “the government”, “the man”, “the system” or some other large and ominous entity rather than accept it as a sign that what I was doing was not economically valued in society.

My attitude held me back from becoming financially independent. By displacing my frustrations on others, it actually killed my motivation to improve myself.

It was only when I hit rock bottom and began the pain-staking process of deconstructing my attitude and reforming it with healthier coping mechanisms did I start setting myself up for the opportunities that I now have.

To all those who feel financially stuck: This world cannot offer you all the help you need to succeed. At some point, you’ll need to put some effort towards helping yourself. If you received some help from close relationships and community, please return the favor reciprocally- they probably need just as much help (in another form) as you do.

D. YOU

24.Just say No

Not just drugs and booze. Say no to people, to ideas, to anonymous callers, to salespeople, anyone with a clipboard. NO should be your default response. You don’t need friends. Friends are liabilities. Associates are fine, but a friend is someone that has no problem asking you for money or to borrow something.

25.Learn to do things yourself. A handyman quoted me $850 to fix a leaky sink. In all honesty I called him just to verify the problem wasn’t larger than I realized. Replaced it myself for $40 and 15 minutes of YouTube.

26.Put a dollar value on your time. Not what you make per hour at your job, but what you think your personal time is really worth. For me it is about $40 an hour. That means if McDonalds forgot my $1 chicken sandwich and I would have to wait in line 20 minutes again to correct it then my time just became worth $3 an hour. Forget it. Move on. It’s not worth arguing on the phone for half an hour and raising your blood pressure for a $6 refund. Unless of course your time isn’t worth crap.

27.Spending more as you earn more (lifestyle inflation). People can’t live like they are students forever. Yet countless people do just increase how much they spend as they earn more. This is one of the biggest reasons why even some very high-income people are broke. Studies have shown as many as 20% of high-income people are broke (living pay cheque to pay cheque), and more in the upper-middle and middle. This is a major reason for that. There are two reasons why people tend to do this – bad habits have formed, or they are trying to “act rich” and show the world they have made it. Instagram probably wouldn’t exist if there weren’t so many people looking to show off!

Below is a common scenario

Dad: Everyone gather round. I’ve got some good news.

Kids: What Daddy what?

Dad: I just got promoted to senior supervisor, that’s an extra $5 an hour…plus I got a cheque for $1000 on my tax return

Mom: That’s great Charles but what does it mean for us?

Dad: It means we’re taking out a new car and spending the weekend in the Bahamas!

A lot of poor people suffer from this seemingly incurable syndrome:

An incremental increase in revenue usually follows with an exponential increase in spending.

Worked double shift at the grocery all month = Buy a new iPhone

Got the piece o’ junk car sold for $800 profit = Take out a brand new Subaru

Grandfather left 2 acres of flood prone land in will = Go buck wild for your next birthday party

Paid off loan for car = 55inch curve screen TV

$500 Christmas food voucher = $6000 food bill and new curtains

Son got his first job= Renovate the house

Price of milk decreases by 50 cents = More money for booze

28.Not having adequate health and life insurance.

The next step is to cover yourself and your family under adequate health insurance. Also, the earning members of the family should have life insurance cover to secure the future of the family.

29.Sleep is better than greed.

People, at times, get lured by fast and easy money. Getting into the market to make quick money is never a good idea, even though you might earn initially but might lose in multiple folds if the fundamentals of investing are not understood. An investment that would make your nights sleepless is not worth investing. One should know that the market has its inherent risk, and it also operates in cycles of bulls and bears.

30.Spending too much time with toxic people and not enough time with more positive people

31.Not engaging in lifelong learning.

32. I call it the “Nikes and Lattes” syndrome. Many poorer people tend to splurge on a little something to make themselves feel good. There is nothing wrong with that, per se. But what keeps people poor is the refusal to create a realistic budget that includes something set aside for savings and investment as a top priority, but nevertheless includes money spent on way too expensive goods or items that can be made at home for about 1/4 the cost of buying at a restaurant or bar. Coffee, breakfast, lunch, snacks and dinner, just for examples, cost way more if purchased at restaurants, convenient stores and other retail locations. If the average person overspends on food, nail salons, coffee, sneakers, video games, lottery tickets, etc. at the rate of $5 per day – that is a $150 per month investment into their financial future that it simply not being made. I am talking about folks who are otherwise not making any such investments. If they would put $150 per month into a Roth IRA and invest in the total market index, and never increase the monthly amount they invest, and do this for a working life – age 25 through Social Security full retirement age of 67 – they would likely earn the market rate of return on these investments over the long haul, and pay not a cent in taxes for this account. If they retire at 67 and collect Social Security, the IRA would be worth $850,000! That is real money – lost to the daily choices to spend on a trifle rather than save for the future. The absence of such decision making can keep many a poorer person poor throughout their lives.

33. Doing anything financial, just because you always have. And you’ve always been in financial straits. People need to change their spending habits.

Don’t feel like you need to donate to charity, no matter how noble or how much you like it. If you are in financial straits, tell the charity that you would like to apply for their benefits. I’ve actually told some pushy people how much I made and how large my family is, to get them to leave me alone or sign me up for their benefits.

Learn to recognize your champagne tastes when you have a beer budget. No, you cannot afford the nicest, but you can afford the most practical.

34.Keep you housing expenses at 25% of your income, despite all the financial institutions telling you that you can afford 30% or 33%. No, you can’t.

Likewise, keep your car payment at about 10% of your income and don’t stretch it out any more than 5 years. 3 years if you can get a decent car with payments at 10% of your income.

35. Keep away from convenience stores and those dollar stores, and especially fast food and Dunkin Donuts. You can brew your own coffee for about 20–30 cents a cup, which DD wants $2.50 a cup. You are literally paying 10 times as much as you should. Another example: you can buy two packaged hardboiled eggs for about $2.00 at the convenience stores. You can buy a dozen eggs and boil them yourself for a buck or so.

36. One of the phrases I have heard so many times. I deserve this, or my child deserves this. For example, a family is struggling financially, and when they get to check out with a carefully chosen grocery cart, they get one of those $5.00 or $10.00 mylar balloons for their child. Because, who is going to tell me my child does not deserve a balloon.You and yours deserve what you can afford. Don’t overspend and buy things you cannot afford, or you will lose what you deserve and now deserve even less. It can be a harsh world out there, even harsher when collection agencies start showing up.

37. You need authority.

Just wait until you get subpoenaed or sued. Wait until someone with “clout” disagrees with you, like a police officer or a politician. Life doesn’t work the way you think.

A friend from America told me “I’m from America and we don’t have equal rights. It’s based on positions of power.

Women have a great advantage here. That’s why you see so many modelesque women in high society. You’ll see teenagers in mansions and hobnobbing with celebrities. I’m sure a lot of it has to do with sex work, but in the USA that’s practically bootlegging moonshine. It’s high profit. They’ll be millionaires in a few years. It’s like that here, with politicians ensuring there’s limited oversight to certain industries and anyone who objects gets dealt with.

Someone I know just went through that with the trucking industry. Companies were playing a shell game with subsidiaries and bankrupting left and right. They were leasing damaged equipment and sucking the profits from their drivers in repair costs and then taking the equipment back, suing the drivers, then bankrupting. It’s every other company. There’s no telling what they were hauling, either. It could have been drugs, guns, people, or nukes because of how lax law enforcement was at checking our cargo and how much sway these billion dollar companies had on politics. Yeah, there’s been a few class actions filed and I’ve been part of two of them, but you generally can’t go up against something like that. They’re too big to fail and will end up getting bailed out like the auto or airline industries have.

Most people are kept ignorant intentionally because of what society needs to function. We can’t all be governors, and somebody has to mow the grass. The system puts pressure on the lower classes to push them further into poverty because they will be more willing to do the jobs nobody else wants. There are whole classes of people based on rank, file, and family ties that don’t have the law applied to them. Any job in the government sector will require a clean background and years of education, usually, and that’s just not possible if you don’t run with the right crowds. I say that because I have first-hand seen the law not being enforced equally. Some people are told to go home and others have their words manipulated against them to ensure they face criminal penalties.

Sure, you might become a success in business and make a good sum of money, but you will be limited to the middle class because people will copy you, rob you, judge you, or make whatever you’re doing illegal out of spite. Having some authority is really the only way to make it and not have it ripped away from you.

I’m sure, to a lesser extent, popularity or some sort of social position like being a church leader will have similar (albeit smaller and often more localized) effects. A lot of celebrities aren’t rich but people are willing to “go to bat for them” more often than the average person. The thing about celebrities and the clergy are they are persuasive and can assert their will onto others in a way that the legal system can’t”.

38.Living in the wrong city

If you can get a job [maybe a lower paygrade compared to an expensive city] in another city that’s cheaper just move there. Most people get stuck living in the big cities just because of ignorance yet their lives would be way better in a smaller city or town.

3000 per month can buy different things in different cities in your country. Do your research and move if you can.

39.Mindset

Now obviously if i keep thinking I’m rich it won’t change, but if you are poor and you tell yourself things like “I can’t try to do further my study because I am poor” then you won’t try to get better qualifications for your job and won’t move up the ladder. Some jobs will pay you for training and if they don’t you can claim it on tax. “I can’t do it I’m poor” shouldn’t be an excuse not to better yourself mentally, physically or financially and I don’t just mean buy more expensive stuff, i mean put the work in go to a doctor, eat well, look after yourself

40.Not having access to basic facilities or lacking life skills is another huge one, my biggest expense last year was using a laundromat because I didn’t have a washing machine. Someone I know spends at least 80% of his income on fast foods because he never learnt to cook, and just never tried, KFC is easier, you walk in hand over money and get fresh hot food in 10 mins.

41.Life is not a bake sale. I see a dozen or more people trying to raise money for something by doing a car wash together and then think to myself… “You know, if they all just went to work at Burger King for the same amount of time and donated their hourly wages, they would raise 5 times as much money”. You may have raised awareness, but you didn’t raise money.

If you don’t learn these lessons, you stay poor. Doesn’t matter if you live in Syracuse or Hanoi.