Subtitles section Play video Print subtitles I have spent the last decade of my life immersing myself in the field of finance and money through a degree in finance, a qualification in accounting and then a career in investment banking, and one of the most life-changing skills I have learned through it all is how to handle my own finances, recognize my bad money habits and break free from them. So in this video, I'm going to share with you nine of the most common bad money habits that hold people back and tips on how to break out of them. Number one, paying yourself last. I first heard of this in the book Rich Dad Poor Dad by Robert Kiyosaki and it's one of the blueprints in achieving financial freedom. Robert explains that the way people pay their bills can be broken down into two types. The first way is the poor people's habit and that is through paying yourself last. So as soon as your paycheck comes in, you then pay your rent, your phone bill, your subscriptions, you find your social plans and then you'll save whatever's left over if there is even any money left to save. The second method he talks about is the rich people's habit and they do the complete opposite. They pay themselves first and that is what you want to do. Take 10% minimum and put that into your savings account the minute you get paid. Treat it like paying a bill. This is so important and by doing this, you're guaranteeing that that money will be saved and won't just slip through your fingers through spending. A lot of people are probably thinking there is no way I can do this, I live paycheck to paycheck. But the surprising thing is when you take that 10% and put it away, your mind will think of ways and structure your spending and structure your finances to last for the whole month, and you won't even realize that you're saving in the background. The key is, to pay yourself first, instead of making other people richer by buying their things before you pay yourself. The second bad money habit is getting comfortable with bad debt. It seems that debt these days is actually the norm. People are using debt to by the smallest of things: to buy presents, to buy clothes. I have a straight rule, that is, unless I can afford to pay for that thing outright in cash, I shouldn't be buying it with any form of debt. Remember, credit card companies want you to be bad with your finances because that's how they make money from this. The average credit card interest rate is 22% which cancels all kind of benefits and rewards these credit card companies are providing if you're not able to pay them off in time. You still want to be managing your debt and paying off your high interest debt as soon as possible. Number three is not having a stockpile. This ties into point number one which is about paying yourself first and essentially, it's saving enough so that you have a buffer behind you of about three to six months. This is super important and it will give you peace of mind just by having this buffer kept to one side and available to tap into if you need it. You free up that mental energy to designate to more important things. So how do you gather this six months of buffer it's through that paying yourself first. Start putting that 10% away and once you have your stockpile, then you can start using the additional money you save to building into your investment fund and looking at investments. Number four is not knowing your income or expenses properly. Until you know what your starting point is, how do you know where you want to be? There's something called lifestyle inflation and that is your spending will rise as your income rises. The more money you make, the more you spend, and it's a cycle. Make more moeny, buy a bigger house, buy a nice car, spend more, make more. Who know exactly where they are financially, they know their assets, they know their liabilities, they have a clear goal on where they want to go financially, and all the steps they need to take to get there are more likely to get a lot of money and build wealth compared to people who just fantasize about money, but have no idea how to go about it, how they plan to acquire it or how to manage it. Just being mindful of their stuff and seeing those numbers in black and white will trigger you into action. Fifth bad money habit is having expensive hobbies. A lot of people like to shop and I guess, yeah, part of this is retail therapy. But again, big media and advertisement companies work to drive consumerism. They understand how to play on the psychology of fear (of) missing out really well. We're constantly bombarded with marketing messages about where we should be in our lives, what we should own, and then we receive messages on what we should wear and where we should be going on holiday. Avoid those situations or rein in those expensive pastime hobbies and replace them with other hobbies, and as a finance and abundance channel, l would say that if you want to spend loads of money on something, let that be towards skills or experiences or education. People can't take that away from you. These are developing you as a human and these extra skill sets that you can then use later on to get a higher pay and add more value and generate wealth in the long term. Next up , we have focusing purely on saving. If you want to improve your financial position, you can firstly save more of your existing income or you can make more money and create more income streams and the ideal combination is a mixture of both. You can't build wealth if you're making more money and spending all, but you also can't if you're just focusing on the saving side because there is a cap to how much you can save. Using those cashback sites will only get you suffer. So to truly build wealth, you have to think of both sides of the equation both how you will save a larger percentage of your income but also how you will make more money Saving money side has a cap, the making money side does not. It's infinite. There is unlimited potential upside, whether it's investing in the stock market, asking for a pay rise, starting a side hustle. You want to break the bad money habit of thinking about saving money is going to massively increase your wealth. Number seven paying too much in taxes. Taxes are going to be the single biggest expense in your life. Whilst everyone has to pay tax, a lot of people just pay it without considering how you can legally reduce your bill. The wealthy they have knowledge of legal corporate structures that come with tax advantages; they hire tax advisors that help them minimize their tax bills. So if you want to get one step ahead one of the best ways to increase your wealth is through understanding tax rules in a way that's stack up in your favor. For example, investing through an Isa or a Roth IRA which is an investment account that shelters your dividend and profit from taxes, or operating under a business instead of an individual if you're an entrepreneur. The tax savings are incredible if you are a company holder and I'll go into these in another video. But all of this stuff is absolutely legal and if you are someone who disagrees with this and prefers to pay more taxes regardless of whether or not you can reduce it legally, then it doesn't hurt to understand the tax rules and reduce that tax bill so that you can instead use the money to give back to things that directly align with your values, instead of letting someone else decide where that money should be going. If you want me to make a video on tax, I was planning to. I already have a summary on what I want to include but I have been a bit skeptical about whether to release it. It's a topic that can go either way. So let me know in the comments below if you want to see that. Number eight, waiting too long to invest. When you start having savings, you have that stockpile that buffer that we spoke about, then you want to start looking at investing that money so that your money starts working for you and you want to diversify those investments so you can weather different situations that come around in life, but you want to avoid leaving that money in a bank account because inflation is a thing and it means that you're essentially losing money every year. So I have a mixture of safe Investments of riskier investments that I'm willing to lose as well. Start looking at different investment strategies once you've saved up enough. Don't leave any additional money more than you need to in a bank account. I have another video and what you can be doing with your money in times like the current recession and I'll link that here for you as well. There's always going to be reasons why you can't invest because you don't have time, you don't have enough money, you don't know where to start. But the longer you put off investing, the harder you will have to work to get that same level of financial freedom as someone who starts investing earlier. And the ninth bad money habit is not caring about finances. If you don't care about something, you're not going to do your best at it. And most people don't care about finances and even worse than that is people who think that finances and having money is evil. I hear people say there are so much more important things in life than money and yes, of course there are, but life is also largely dictated by finances, so you might as well master this and immerse yourself in this world where you can learn to use your finances in a way that gives you freedom and the independence that you want. It may just be finding the right person or the right tools that help you resonate with your finances in a way that most appeals to you, whether that's through an employee perspective, an entrepreneur perspective, someone who is a less of a risk taker, someone who is more of a risk taker, but there will be someone who kind of matches your investing style more closely. Thank you so much for watching. If you like this video, you may also enjoy another one that I've linked here on building wealth and making money work for you.