Wananchi Opinion: Money habits that will make you poor

Money management is a crucial life skill that determines financial stability and long-term success.

While earning money is important, managing it wisely is even more critical. Many people struggle financially not because they lack income but due to poor money habits.

These habits can lead to debt, financial stress, and an inability to build wealth. I’ll explore some money habits that can make a person poor;

Reckless spending. One of the most common money habits that lead to financial struggles is reckless spending.

Many people spend money impulsively without considering whether they truly need an item. This habit is often fueled by lifestyle inflation-where people increase their spending as their income grows.

Instead of saving or investing, they purchase luxury items, expensive gadgets, and unnecessary subscriptions.

For example, someone earning a decent salary might buy the latest smartphone every year, dine out frequently, or purchase designer clothes beyond their means.

While these expenses may bring temporary satisfaction, they can quickly drain financial resources, leaving little room for savings or investments.

Without discipline in spending, even a high-income individual can find themselves living paycheck to paycheck.

Excessive debt. Taking on too much debt is another habit that can trap people in financial difficulties.

While some debt, such as student loans or mortgages, can be considered necessary investments, excessive consumer debt-especially credit card debt, can be financially crippling.

Many people fall into the trap of borrowing money to fund a lifestyle they cannot afford. Credit card debt is particularly dangerous because of high-interest rates.

A person who continuously spends beyond their means and only makes minimum payments on their credit card will find themselves stuck in a cycle of debt.

Additionally, personal loans and payday loans with high-interest rates can worsen financial problems.

The more debt a person accumulates, the harder it becomes to achieve financial freedom.

Lack of budgeting. A failure to create and follow a budget is another reason why many people struggle financially. A budget helps track income and expenses, ensuring that money is allocated wisely.

Without a budget, individuals often spend money without realising where it is going, leading to unnecessary financial strain.

For example, someone who does not track their expenses may unknowingly spend a significant portion of their income on coffee, dining out, or entertainment.

Over time, these small, unplanned expenses add up, reducing the amount available for essential needs and savings. A proper budget helps individuals prioritise their spending and avoid unnecessary financial stress.

Failure to save and invest. Saving money is a fundamental aspect of financial stability, yet many people fail to prioritise it.

Some people believe they need to earn a high salary before they can start saving, but this is a misconception. Regardless of income level, setting aside a portion of earnings for emergencies and future needs is essential.

An emergency fund can prevent financial disaster during unexpected events such as medical emergencies, job loss, or car repairs.

Without savings, people are forced to rely on loans or credit cards, leading to more debt. In addition to saving, investing is key to building long-term wealth.

Those who neglect to invest miss out on opportunities to grow their money. Investments in stocks, bonds, or real estate can generate passive income and provide financial security over time.

Ignoring financial education. Many people remain poor because they do not take the time to educate themselves about personal finance. Understanding money management, investing, and financial planning is essential for financial success.

Unfortunately, many individuals rely on outdated beliefs, financial myths, or bad advice from friends and family. For example, some people believe that saving money in a regular savings account is enough for financial security.

While saving is important, investing is necessary to grow wealth over time. Others might fall for get-rich-quick schemes or scams due to a lack of financial knowledge.

Reading books, attending financial literacy courses, or consulting financial experts can help individuals make informed decisions. Without financial education, people are more likely to make costly mistakes that keep them in poverty.

In conclusion, poor money habits can prevent people from achieving financial stability. Breaking these habits requires self-discipline, careful planning, and a willingness to learn about money management.

By adopting better financial practices, individuals can secure their future, avoid unnecessary financial stress, and build long-term wealth. Ultimately, financial success is not just about how much money one earns but how wisely it is managed.

Mr. Abol Kepha Kings is a personal finance coach