A recent study shows that over 60% of Americans are living paycheck to paycheck. If you are like one of the millions of people struggling to find financial stability, you might be stuck in the wrong mindset. Avoiding certain mental money traps can help you adjust your spending and start saving for your future.
Creating a budget and sticking to it can help you achieve your financial goals, but you will also need to rethink how you spend money. Prioritizing your spending can help ensure that you have money left over each month to invest. If you are tired of seeing a miniscule balance in your checking account, reconsider these 7 mental money traps that keep you poor.
You Need To Spend Money To Make Money
You have likely heard the old adage, “you need to spend money to make money.” While this may be true for startup businesses, it isn’t a good mindset for most people.
Many people feel that they need to live a specific lifestyle, spending well more than they make to give the perception that they are wealthier than they are. Overspending will only leave you frustrated and won’t help you make money.
Almost all money experts agree that the key to wealth is investing. If you want to stop living paycheck to paycheck, take a look at your non-essential spending and start investing. Even small investments can pay off significantly over time.
Retirement Is Far Away
Many young people fall into the trap of thinking that retirement is far away so they don’t need to worry about it. Unfortunately, waiting to start saving for retirement can cost you big. Fidelity Investments recommends that you have at least 1x your salary saved by the time you are 30 and 3x your salary by the time you are 40.
The longer you wait, the less likely you will have the money you need when you retire. The good news is that even if you haven’t started saving, you can start now. The best way to go about it is by meeting with a financial advisor. Make sure you are also taking full advantage of your company’s 401(k) matching if they offer it.
You’ll Be Happy If You Buy Something
It is hard to deny the brief feeling of euphoria that comes with buying something. The truth is, however, that the feeling is often short-lived and followed by buyer’s remorse.
Break the vicious cycle by curbing your spending. Setting a budget can help you avoid buying non-essential items. Be sure to allow yourself some wriggle room though. Completely depriving yourself of discretionary spending can lead you to binge shop.
Salary Is All That Matters
When you are just starting out, you may think that salary is the only number that matters when it comes to your job. But salary is just one part of a much larger equation.
You will want to factor in things like benefits that can significantly affect your bottom line if your company does not cover them. You might want to consider taking a slightly lower paying job with more benefits, like better health insurance, in order to see your checking account go up.
Playing the Lottery Will Make You Rich
It’s a trap that millions of people fall into. The idea that a few dollars can turn into unimaginable wealth is extremely enticing. But as most people know, the lottery will likely not make you rich.
As a matter of fact, you will inevitably lose more money than you win. Over the course of a lifetime, if you had invested all of the money you spent on scratchers you would probably be living large.
Buy Now, Pay Later
Another often too good to be true scheme is the “buy now, pay later” motto. Most stores offer some form of this, and usually it is in the form of financing.
The problem with buy now, pay later is that it gives you the false security of still having money in your pocket. You end up spending even more money than you intended to and are stuck paying on an item for months or even years on end.
Do not fall into the trap. Only buy items that you have the money on hand to pay for.
You Don’t Have Enough To Invest
It is not uncommon for people to think that they simply do not have enough money to invest. They may assume that the amount of money they have left over each month is insignificant.
In reality, these small investments can add up to a big return. Do not underestimate what you can put aside for savings. Investing even little amounts can help you achieve your financial goals over time.
