Bad Spending Habits That Are Making You Poor: How to Break the Cycle

Have you ever wondered why you never have any surplus even though you earn better than most of your friends? Your money comes in around the 1st of every month, but by 20th, you are looking at Mshwari to ‘Okolea’ for the remaining part of the month. 

Some of us have a good income but we are always stuck in the cycle of being rich as the month starts and getting poorer and poorer as the month progresses. Why? Poor money habits. 

Every one of us is suffering from one of those. Your bad habit might be different from the next person, but these habits make us never progress. So what is your bad money habit?

Here are examples of habits that might be the reason you clicked to read this article. 

Emotional Purchases

Humans are emotional beings. As much as our intelect is able to guide our ability to make rational decisions, most of what we do daily is based on our emotions. Our emotional triggers and responses are capable of affecting how we react to events presented to us.

Let take a very realistic example, assuming that you already have a functional Toyota Corolla model 2001 that is in great condition and is able to take you from point A to B with no problems. Why would you budget for a new Mercedes-Benz SUV? Emotions! 

In reality, this decision is not led by rational factors. Maybe you need the new car because you love the Mercedes brand. Or perhaps it is because all your friends are getting sleek vehicles, and now you feel inferior and need to upgrade. 

Whatever the case, emotional purchases are one of the main reasons you are stuck in the red zone. They drain your pockets and, in many cases, drive you deeper into debt.

How to break the habit: There is no secret magic formula to breaking the bad habit of emotional purchasing. You just need to practice the good money habits that we talk about all the time on this page. Have clear financial goals and make a budget around these goals. And most importantly, commit to sticking to the budget. 

Spontaneous or Impulse Buying

These are more or less the same as emotional purchases. However, spontaneous buying is even more lethal than emotional purchases when it comes to depleting your savings. 

The textbook definition of impulse buying is the decision by a consumer to buy a product or service without a prior need or purpose. 

For example, imagine walking into a supermarket in the evening to buy bread for breakfast and walking out with an 85’ TV. You surely do not need a new TV as your old TV is barely a year old. “But the screen looked so cool, and it will look great on my living room wall,” you tell yourself. 

Well, the truth is, it will indeed look great on your wall, but your bank account will not. The psychology behind impulse buying is something marketers understand and exploit perfectly—that is why there are so many eye-pleasing goodies on the checkout counters in the supermarkets. 

How to break the habit: Just like emotional spending, there is no hidden trick that you need to master. It is all about understanding your financial goals and deciding to stop making the wrong financial decisions. Be intentional. 

Overspending

My mother has this habit of asking me every end of the year, ‘ni lini tunarundishia mwili shukrani?’ (When are we saying thank you to ourselves?) She means, when am I taking leave from my work to go for a holiday and relax. 

After all, work without play makes Tom a dull boy. We all need it. But what happens to your finances when you take a holiday. Do you stick to your budget, or does the ‘soft life’ at the beach make you want to break into your fixed account? 

You had the plan to go see the tides and soak your skin in the salty water, but now there is this cool yacht taking people around the ocean for only ‘25 Gs’ a trip. And well, god forbid if you don’t try it. Why? Because as they say, YOLO. 

Overspending is a universal problem for most of us. Even without going as far as overspending on a trip, many of us draw up budgets but quickly forget about it and spend as we may. 

If we do not break from this habit, we will forever be stuck in the cycle of a cheque to cheque or, rather, hand to mouth. 

How to break the habit: It is simple, really. Stick to the budget. 

You Focus More On Paying Less as Opposed to Paying for Value

Going frugal is good. But often-times than not it is more expensive. 

Sometimes, you might think that buying a Ksh.15K refurbished laptop will help you save Ksh. 20K you could have spent buying a Ksh. 35K brand laptop. However, there is a high chance that the computer was not well taken care of during the refurbishing process, leading to it dying on you at a crucial moment.  

In the end, you end up spending much more on repairs or replacement than you would have paid if you invested in value when you made the first purchase.

How to break the habit: Sometimes, the need to make the best buy and save more might end up sabotaging us. This is one thing that the rich know and avoid. The cheapest route isn’t always the most valuable. Instead of going for the cheapest option, take your time and analyze the future benefits of each option. Go for the best value. 

Spending Too Much on ‘Consumption’ Instead of ‘Creation’

Another major money mistake we make that permanently keeps us from getting rich is spending on ‘enjoying ourselves.’ I mean, I earn well, so why should I not turn up every Friday and hang out with my friends and spend a few thousand while at it? 

Even without considering the weekend partying, everything that you buy is to satisfy your immediate need. You buy the latest watch and phone. Upgrade your car every few years. Eat at the best restaurants because, well, why not? You have the money, right? 

But all these are ‘consumptions.’ What are you doing with your money now to ensure that your future is secure? This is what the rich refer to as ‘creation.’ 

How to break the habit: Instead of focusing on immediate satisfaction, focus on creating a foundation for the future. Invest. Invest. Invest. Invest in your education. Invest in assets instead of liabilities. Let your money work for you. It might not be easy, but it is doable. 

Conclusion 

There is no secret formula to financial freedom. Well, unless you know something that we do not - like a secret goldmine for example. 

Hence, if you want to make progress in your financial journey, you need to be intentional about it. The first step is to know where you are going wrong. Stop spending money just to ‘flex.’ A new car will definitely make you look good. But it adds very little value to your financial journey - unless you are using it for business. 

The points above provide you with the first step into knowing and understanding how to make better money decisions.