Yahoo Finance Ramit Sethi Says These 7 Money Habits Keep You From Building Wealth
Ramit Sethi, a popular personal finance advisor and writer, recently uploaded a video on his “I Will Teach You To Be Rich” YouTube channel about the top money habits that keep people from building wealth. Many of these habits are based on one’s mindset, while others are due to their more active money behaviors. But all of them can make it harder to become truly wealthy.
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Here are the seven most common money habits that hold you back from leading a rich life, according to Sethi.
Ignoring Money
One of the most common money habits that keeps people from becoming wealthy is also a simple one: They ignore their existing money issues or neglect important money-saving strategies.
Ignoring credit card debt’s a big issue for many people. Sethi suggested making a debt payoff plan so you know exactly which debts you owe and how you want to tackle them. He suggested aggressively paying off any high-interest credit cards as these can be expensive and take a long time to get rid of.
The other issue here revolves around investing. Sethi said many people wait to invest until the future, but they never have a solid plan for how or when they’re going to do this. He suggested taking 5% to 10% of your income and setting up automated investments. That way, your money can work for you without you having to think about it.
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Asking $3 Questions, Not $30,000 Ones
Another common money habit that holds people back is the way they see money and try to cut out the small expenses. For example, people often try to reduce how often they go to cafes or cut out monthly subscriptions to Netflix to save money.
This habit is what Sethi called “asking $3 questions.” It might feel like it’s accomplishing something, but it’s probably not influencing your finances much in the long run.
Instead, Sethi suggested focusing on the “big wins” — or the $30,000 questions. As he pointed out, even if you get only a few of the big wins, they’re likely to be worth significantly more than multiple smaller ones.
For example, instead of cutting out a few smaller expenses, prioritize increasing your salary via a raise or change of jobs. Even a $5,000 yearly increase can be more financially beneficial than dropping a streaming service subscription. This is especially true when you use that extra money to invest or buy something you truly need or love.
‘Playing Defense’ With Money
Investing can be stressful or confusing, especially for those who are new to it. But avoiding it altogether, or “playing defense with money” can keep you from building wealth.
If you’ve invested in something and find yourself constantly logging into your account to check your balance or checking the market, you might need to re-evaluate your situation. This could be a sign that you feel out of control with your finances or that you lack a system needed to keep your finances on track and growing.
Sethi suggested uninstalling any financial apps you might have on your phone, especially if they’re causing you a lot of stress or you find yourself homing in on the small details. These small details also could cause you more guilt about your money than you need. And they could be preventing you from playing offense with your money.
Following Invisible Scripts
Invisible scripts, Sethi said, are beliefs or views people have that guide their behaviors. These behaviors can end up becoming traps that might not be immediately noticeable. Invisible scripts often include concepts or beliefs that stem from what other people around you have said.
One example of this is the idea that you should buy a house just because you’ve heard that you’re throwing away money on rent. If you purchase property for that reason alone, it might not be the best financial decision for you.
Another invisible script is the idea that you can’t afford something because people around you — like your parents — used to say that a lot. This could be something as small as a cup of coffee. Unfortunately, this belief can make you feel guilty if you do decide to purchase something you “couldn’t afford.”
Other examples of this include “We don’t talk about money” and “Investing is only for rich people.” These ideas are self-limiting and anxiety-inducing.
Ultimately, as Sethi pointed out, many people don’t realize how much what they heard growing up influences their financial decisions now. Even if you’re making a lot of money or your finances are stable, you might be stuck in someone else’s behaviors or money habits.
Sethi suggested assessing your money beliefs and re-evaluating your habits whenever you can to see whether they make sense or not. If they don’t, you might need to make a change.
Having Generic Goals
Another money habit holding you back from true wealth is the lack of specific goals. Sethi said many people want to “do what they want when they want.” But when asked what this means for them, or how they intend to get there, they don’t always have an answer.
Instead, Sethi suggested asking yourself: “What do you want to do with your money?” Design your ideal, wealthy life and set some S.M.A.R.T. goals — that is, specific, measurable, attainable, relevant and time-oriented goals.
If you’re not sure where to begin, you can always start with something big and narrow it down from there. Whatever else, having specific goals — like a certain income you want to have — can help you build financial stability and wealth.
Spending Without a Plan
Many people view spending money as a bad thing, according to Sethi. These people often tell themselves they need to be better about spending and saving money. They can be very judgmental of themselves and others about what they consider to be frivolous spending.
But, as Sethi pointed out, spending money should feel good. It shouldn’t cause anxiety, guilt, or undue stress.
He recommended having a vision of how you want to spend money and to prioritize things you truly enjoy. You can then cut costs on the things you don’t enjoy as much.
Build some flexibility in your life and budget. As an example, Sethi proposed creating a bucket in your budget that allows you to spend 20% to 35% of your income on guilt-free purchases. Even if you can’t dedicate that much money right now, it’s a goal you can shoot for.
Having a Scarcity Mindset
There are certain phrases that people say — like “That’s a waste of money” or “I’m never going to be able to afford that” — that keep them from getting the things they want or need.
Much of this comes from having a scarcity mindset, and it’s something that can keep you from becoming wealthy. Having a growth mentality, meanwhile, can allow you to use your money and fuel a more vibrant life.
Sethi suggested evaluating your financial situation and asking yourself why you feel the way you do. In some cases, your initial assessment might be correct. In others, you might be able to make a positive change in your mindset — and your financial habits.
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This article originally appeared on GOBankingRates.com: Ramit Sethi Says These 7 Money Habits Keep You From Building Wealth
