7 of the WORST Money Habits of All Time | 100% Preventable

in this video we discuss seven of the worst money habits of all time coming up next on holy schmidt holy schmidt we spent a lot of time talking about money on this channel ways to optimize your savings social security your 401k how to spend wisely but we have not yet broached the topic of the worst things to do with your money so i thought that i would put together a common list you would have seen this dozens of times in your life maybe even more maybe even you personally have engaged in a few of these so why don't we jump into it but before we do please make sure you click subscribe and turn on notifications so that you get alerted the next time i post a video i post about twice a week all right let's go let's begin by acknowledging that no one is perfect no matter how perfect you think you are at money no one is perfect but there is imperfect and there are definitely no no's and this list is the list of no-nos number one is binge spending let me explain why is it that when people get their paycheck the paycheck is gone within a few days that's not always the case obviously there are people that are very very good with spreading out their finances but there are people also that get it out the door as fast as possible when the paycheck comes in the starting gate opens up and they're off to the races as it turns out there's a term for it and the term really explains the buyer's high that someone gets when they are out putting money out very very fast and in fact according to psychology today 20 million people in this country engage in compulsive spending the habit often originates when parent and child are out together and they have a shopping date what is a social activity is the catalyst for something that is much deeper the enjoyment of being together was the outcome and the spending of the funds was the catalyst so there was a direct link between spending and enjoyment in some instances it almost didn't matter what the purchase was it was the fact that the two together would go out they would commiserate they would discuss and they'd end up buying something along the way so if you're engaging in binge spending realize that you're probably addressing a social need not a product need horrible money habit number two is ignoring interest rates what makes a credit card so dangerous is the separation of the act of buying with the pain of paying they often don't even occur in the same month this is particularly dangerous when you don't have to pay off the balance at the end of the month which is the case with most credit cards add to this the absolute enormity of credit card interest rates and it's easy to think 18 21 what's the difference the it's still large either way mentality combined with the separation of spending and paying is something that creates a horrible situation for many many people in fact they grow numb to the number they get advice like pay off the smallest balance first ignore the interest rate just pay off the smallest balance first this is good advice to deal with the psychology of debt which is to have little mini wins along the way by paying off a credit card you have a bit of a victory which gives you momentum to the next credit card thinking about interest rates in a critical manner is difficult when the emotion of the credit card balances it's 18 or 21 percent what's the difference so when you think the 3 percent isn't a big deal imagine right now if your mortgage was three percent higher than it is today yours is six percent your neighbors is three percent would you think it was a big deal then you absolutely would think it was a big deal and you would work very hard to get your mortgage from six percent down to three percent as fast as possible this is because you've been trained to think that your mortgage rate needs to be as low as possible the fact is you're emotionally involved in your home and your mortgage is a big part of your home so you pay attention to it so when you think twenty one percent is no big deal it's only a few thousand dollars remember that over a decade that becomes a very large number horrible money mistake number three is living paycheck to paycheck a lot of people live paycheck to paycheck they have too much month at the end of their check as the saying goes living paycheck to paycheck means you miss a lot of money saving opportunities and the fact of the matter is whether you pay it today or two weeks from today you're still paying the same amount and candidly if you're paying it two weeks from today you might even be paying a late charge along with the payment think about the airline ticket or your vacation as a starter if you buy your airline ticket as you're driving to the airport because it's payday it's going to cost you two three four times as much as if you bought it a month earlier what about the vacation same thing if you book a hotel right before you get on the plane you're going to get the last of the rooms they're not going to be the best they're going to be the worst and they're also going to be the most expensive and some discounts only happen if you pre-pay if you have someone who takes care of your lawn generally they will give you two options you can pay month to month or you can pay the whole year in advance and they'll give you a 10 or 20 discount by the way before we change subjects subscriptions can be quite dangerous whether you're subscribing to a magazine or a lawn service company make sure that you're getting what you pay for in the case of a magazine the chances are you're not because for most people when they buy a magazine it goes right in the drawer or in the garbage and they never read it so if you have a subscription and you're not using it cancel it all right back to the video along the same lines you can't buy in quantity because you can't make it to the end of the month and i'm not talking about buying a quantity where you go to costco and you buy six months worth of groceries i'm talking about buying a pack of 10 batteries instead of buying a pack of four and of course you will routinely pay late fees and if you pay your credit card late not only will you pay late fees but your credit can be affected and if you're not paying your credit card on time and you have the option to postpone you most certainly will carry a balance and pay interest on your credit card if you're in this situation it takes one month to get out of it simply take that month and don't spend money on anything discretionary it will be tough but you only have to do it one time usually that means don't go out to dinner it means don't go to the movies and stay home for 30 days and at the end of 30 days you'll have a little leftover in your checking account that should be enough to allow you to start working your way out of the situation and the following month give yourself a little bit more space and then a little bit more eventually you'll be able to buy the vacation early you'll be able to pay for your subscription for the full year if this is something that you want to keep but most importantly you won't be in a situation where you have three days left and you don't have any money to pay the bills horrible money habit number four is status shopping how about a nice two thousand dollar purse to put your keys in do you get two thousand dollars worth of enjoyment from buying and using that purse what about the mcmansion that you bought right at the front of the street it costs 50 more than your neighbor's house does it give you 50 percent more enjoyment there's a great book i think you can still get it on amazon called class a guide through the american status system it was written by a man named paul fusell and it breaks down the spinning habits based on someone's social status it's a bit satirical because not everyone falls into the spinning classes that mr fusell describes and that was the entire point of the book however it does make you think in a nutshell the way people spend their money has less to do with their income and more to do with if they have something to prove those in the middle want to look like those at the top or at least what they think those at the top should look like this group wore designer golf shirts and drove german sports cars interestingly those at the top didn't make statement purchases they deployed their funds based on what they wanted and needed not what their neighbor would think of what they purchased their homes were comfortable generally private away from the street and not oversized i've always been impressed by warren buffett and his home in omaha nebraska he purchased his home in 1958 he still lives there today it's 6 500 square feet he purchased it for 31 500 incidentally warren buffett is worth over 100 billion dollars so he can afford just about any home he wants but yet he decided to stay in the one that he purchased in 1958 he says it's comfortable it has a lot of memories and still more memories to go he has nothing to prove money mistake number five using credit cards to pay your bills for many people if you use your credit card to pay your bills you will be spending more than if you simply write a check or use a debit card this is true whether you pay off your credit card at the end of the month or not why because you separate the pain of seeing the funds come out of your account from the act of buying moreover there's some confusion about where your finances actually lie you have a little more cash in your account than you thought but you've got this debt that's outstanding you haven't reconciled the two and you won't until you get your credit card bill you say yes jeff but i pay off my credit card every single month great but that doesn't mean that you will be ruthlessly precise about your spending the way you would if you were writing a check or paying cash unless you're simply that kind of person by the way most people are not that kind of person so if you are then forget what i just said for the rest of us try using your debit card or writing a check money mistake number six is paying your bills late early on i mentioned the living paycheck to paycheck saga and i mentioned the fact that people often pay their bills late but there's another group of people that pay their bills late people that just don't get around to it let me explain you get your credit card bill you toss it in the drawer you've got plenty of money in your checking account your credit card bill comes and goes and you don't get to it get notification from your credit card company saying you're late can you please pay this you do pay it usually sometimes you think i'll just get it on the next one and then you pay it then the problem is that even though you can and will pay your credit card the credit card company doesn't know that so what happens they report you to the credit bureau paying your bills late will decimate your credit score it doesn't matter if you could and you just decided that you weren't going to it doesn't matter if they charge you a late fee and you just say i'll pay the late fee you still will get hit with a late payment notification on your credit report if this is you i'll give you the same advice that i gave to the person who has too much month at the end of their money and that is take a month off pause discretionary spending it doesn't matter if you can afford it pause it build a little excess so that you can again pay everything on time or even early and focus on paying your bills when they come in the door not when they're due horrible money mistake number seven is hoarding your money this is just as bad in many cases as having too much month at the end of your money living paycheck to paycheck the reason is because you have the same outcome a few videos ago i discussed the difference between efficient and effective spending efficient spending is buying exactly what you need and nothing more effective spending is buying something at a great price sometimes the two come together and that's nirvana you get exactly what you need at a great price and that outcome is wonderful but oftentimes the two are completely separate from one another if you hold a lot of cash simply because you want to see a large number of zeros in your bank account you miss out on the juice of life you probably miss out on the opportunity to pay off your mortgage pay down your credit card refinance your house to a lower rate because you don't want to spend the money to pay the fees to pay down your house at a lower rate and of course you're not building credit through demonstrable spending and repayment so that's my list thanks for watching before you go check out this video right here it's one that youtube thinks that you will like and they're pretty good about picking winners in this area this is jeff schmidt thanks for watching

Channel: Holy Schmidt!

Views: 135,421

Keywords: money habits, money habits, money habits of the rich, money habits that keep you poor

Id: kSQXhlYyh9Q

Length: 12min 41sec (761 seconds)

Published: Sun Mar 27 2022