Growing up, I watched my parents be quite conservative in spending their money. Any purchase of significant value was thoroughly discussed before it was made, and everything we owned was well taken care of to ensure we could use it for a long time.

My parents did not have a lot of money, but what they did have was good money habits: they were good savers, and that lesson was instilled in each of us children.

Interestingly, what drives money behaviours has not changed. The fact is that your observations of your parents’ relationship with money, along with that of family and friends in your early life, become deeply ingrained, and they are likely to be influencing your current money-related habits, even now.

Now, fast forward to today. I have been working in the international financial and wealth management space for the past 24 years, and I can tell you for certain that the phrase “The more you make, the more you spend”, is completely true.

As a result, even a large salary does not necessarily mean you are rich. Bad money habits will bankrupt high-income earners just as easily as low-income earners. What you earn will only take you so far. How you manage what you earn will be the true key to your success.

What, then, are ten of the worst money habits to have?

1, Living beyond your means

One of the most damaging money habits is living beyond your means. This often leads to accumulating debt that can spiral out of control. Overspending on luxury items, dining out, or even spending on unnecessary subscriptions contributes to financial strain.

2, Neglecting to budget

Many people fail to create a budget or don’t stick to the one they created. But budgeting is a critical aspect of effective financial management. Without a budget, it’s challenging to track where your money is going, making it easy to spend excessively without realising it.

3, Impulse spending

Impulse spending is a major pitfall that can derail even the best financial plans. Whether it’s making unexpected purchases in-store or online, this habit can upset your financial foundation, and it can take a significant amount of time to rebound from impulse purchases.

4, Ignoring savings

Failure to prioritise savings is a huge mistake, especially if you are living from paycheque to paycheque. It’s crucial to set aside money each month to ensure you have savings for emergencies and to meet future goals.

5, Relying on credit cards for everything

Using credit cards for all purchases can lead to mountains of debt due to high-interest rates. Although credit cards can be beneficial when used responsibly, relying on them for everyday expenses can lead to a vicious cycle and unmanageable, long-term debt.

6, Not planning for the future

Many people neglect retirement planning and long-term financial goals. They assume there will be plenty of time later, or they think they are too young to even think about it. Failing to prioritise retirement savings can have devastating long-term effects due to the power of compound interest and the ability to dollar-cost average with investments.

7, Overlooking insurance needs

Insurance is an integral part of financial health, yet people often overlook it. They think of it as a waste of money, rather than as a risk-management tool. Whether it’s health, auto, life or homeowner’s insurance, being underinsured can lead to financial catastrophe in the event of an emergency.

8, Failure to invest

Many people avoid investing due either to fear or lack of knowledge. Instead, they opt to keep their money in low-interest savings accounts. But inflation can erode the value of cash savings over time, whereas investments have the potential to grow significantly.

9, High-interest loans

Payday advance loans and other high-interest borrowing methods can lead to a vicious cycle of debt. These loans often come with exorbitant interest rates, making it difficult to repay them. As a result, they often trap borrowers in a cycle of borrowing, just to pay off previous debts.

10, Ignoring financial education

One of the most detrimental money habits is ignoring financial education. The more you know about managing money, savings, investments and estate planning, the better equipped you’ll be to make sound financial decisions.

On the other side of the coin, good money habits don’t necessarily mean no spending, no fun and no enjoyment; they just mean being mindful of your expenditures and making sure you plan.

I read an article earlier this year titled, “Five winning habits of millionaire entrepreneurs” (Houston, 2024), and let’s face it: being an entrepreneur can be risky if the idea you turn into a business does not succeed. However, when it does succeed, it is important to have good money habits to ensure the long-term financial success of the business and the entrepreneur, personally.

So what are the “five winning habits of millionaire entrepreneurs”?

1, Every cent matters

Successful entrepreneurs meticulously monitor their finances. They have a clear understanding of their sources of income and their expenditures. This tracking enables them to pinpoint areas of excessive spending and take corrective measures before issues arise.

2, Live within their means

Successful entrepreneurs prioritise living within their means. They refrain from indulging in unnecessary expenditures, choosing instead to invest their money in their businesses, personal growth and savings. These individuals are not interested in flaunting their wealth; they are committed to building lasting financial security.

3, Multiple streams of income

The key to building true wealth lies in diversifying your income streams. This means that rather than relying solely on a single paycheque or other source of revenue, entrepreneurs focus on generating income from a variety of different sources. They prioritise building a portfolio of income streams to ensure their long-term financial success.

4, Invest in themselves

The world's most successful entrepreneurs have one thing in common: they prioritise their personal and professional development above all else. They understand that growth is a lifelong process. They know that the key to success is not just having the right strategies but having the right mindset.

5, Take calculated risks

Entrepreneurs are open to taking calculated risks. They understand that every risk has a potential reward, and they weigh the two against one another. They mitigate risk by doing thorough research, consulting experts and staying current with trends in their industry. This allows them to make informed decisions and increase their chances of success (Houston, 2024).

The great news is that bad money habits are easy to change: as with any habit, you have to want to make the change and focus on changing. Just remember that you work so hard for the money you make, you need to make sure you have the same commitment to managing it.

Reference

Houston, M. (2024). ‘5 Winning Habits Of Millionaire Entrepreneurs’. Available from: https://www.forbes.com/sites/melissahouston/2024/01/07/5-winning-habits-of-millionaire-entrepreneurs/ [Accessed 1 December 2024].

• Carla Seely has 24 years of experience in the international financial services, wealth management and insurance industries. Over the course of her career, she has obtained several investment licences through the Canadian Securities Institute. She holds ACSI certification through the Chartered Institute for Securities and Investments, UK; QAFP through FP Canada; and AINS through the Institutes. She also has a master’s degree in business and management