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And how to accelerate fruitful financial outcomes
The only way to know if you’re living above or below your means is to track your spending and income down to every transaction. After doing this for three months, you will capture an accurate glimpse of what’s really going on with your money.
Here’s the thing: You can’t build wealth if you live above your means; it’s impossible. The habit of living above your means sets you up for short-term and long-term financial failure.
2. Misusing Credit Cards
Ideally, you should use 10–30% of your credit card’s available credit.
Maxing out your credit card and paying the statement balance before the end of the month is okay. However, you must be careful to only charge your credit card for purchases you can pay back in full (unless you’re in a temporary financial bind), or else you reach the point when you can’t pay the entire statement balance.
Three dangers of credit cards:
It’s not your spending money; it’s money you have to pay back, potentially with interest, if you decide to pay late.
Using a credit card can give you a false sense of how much money you can spend.
Plastic usually leads to spending more money than you should because you don’t “feel” the purchase versus if you used cash or a debit card.
If you tend to max out your credit cards and overspend with them, avoid them altogether until you learn how to use them responsibly because that interest will eat your finances alive.
Credit cards can lead down a dark path if you’re not careful. One day, you’ll wake up with tens of thousands in debt.
3. Hop On The Minimum Payment Train
The number one reason why credit cards, financing, and loan companies want you to make minimum payments is so that you pay them considerable interest fees.
By the time you pay stuff off, you have potentially paid 1.5–3 or more times the original cost. Is it worth it? For some things, yes. For many things, no. Avoid minimum payments; instead, focus on paying things off fast to avoid paying interest or at least paying as little interest as possible.
4. Lifestyle Creep
Every time you get a raise, bonus, new income stream, or promotion, there’s a new opportunity for you to spend more, there’s an opportunity for you to enhance the amount of luxury in your life, and there’s an opportunity for you to elevate your expenses because of the new money you’re bringing in.
Wrong move. Keep your spending habits the same, or even decrease your expenses to boost your income.
People who avoid lifestyle creep create the opportunity to achieve wealth building.
5. Manage Too Many Vices
The top vices people have that destroy their money include:
Drugs
Alcohol
Partying
Eating out
Gambling/Betting
The less vices you manage, the better. My vice is eating out, but I control it by limiting how often I eat out, and I still prioritize groceries and meal prep. Vices can get pricey for your money, your health, and other areas of your life if you’re not careful.
6. Careless Spending
I adopted minimalism because I want to focus less on attaining things and more on attaining the right things and investing in the right experiences.
Moreover, I always want to ensure I contemplate my purchases before immediately going for the impulse buy. Sometimes, I give in to an impulse buy, but for the most part, I consider whether a purchase is needed or wanted and the value it will provide me or others.
Avoid careless spending.
Observe your surroundings, and you might notice “sitting money” for items you don’t need, want, or use. Don’t throw away your money on careless spending.
7. Finance Your Life
It is now easier than ever to finance your life. Credit cards, loans, and many creative financing options can help you fund the life of your dreams or at least something close to it.
The problem with this freedom is that it is a false sense of freedom. Eventually, you have to pay it all back – with interest.
Would you rather be indebted to someone or be free? There are levels of indebtedness.
The level of indebtedness to avoid is when you’re living the minimum payment lifestyle, have little to no savings, and don’t own anything you “own”; this isn’t living, nor is this freedom.
8. Avoid Investing
If you’re not investing, wtf are you doing? Always prioritize increasing and acquiring more assets and decreasing your liabilities. Focus on attaining more assets that create wealth versus liabilities that detract wealth. Use compound interest to your advantage by investing and leaving your assets alone for extended durations. And if you don’t know squat about investing, learn about it through self-education.
9. Avoid Financial Education
I didn’t know sh*t about investing until I started reading and educating myself about it. There is still endless information I don’t understand and don’t have. The journey of learning never ends, and the best way to elevate your finances is to invest in your financial education aggressively.
If you avoid financial education, you set yourself up for financial failure. You don’t need to know everything; you need to know the correct information.
10. Limit Your Earnings
There is no limit to the amount of money you can earn – unless you believe there is a limit on your earnings. Never limit yourself financially. Continue expanding your goals, continue expanding your career options, continue expanding your income streams, and continue expanding your investments and assets.
Limiting your earnings leads to failure because it limits your potential earnings, which can significantly impact the kind of life you experience.
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This content is for informational purposes only — not professional advice. Consult a qualified professional before making any major decisions.