Have you heard of the 7 Habits of Highly Effective People? Well, habits work the other way. Habits start with what you choose to think about, they impact your emotional states, and this impacts how you choose to act.
Believe me, the world only cares about what you actually do. It couldn’t care less about your intentions, motivations and emotions. The world says, “Forget about your feelings. I don’t care. All I care about is what you actually do with your life.”
At this level, the world is objective. It looks at results. Unfortunately, most people think that the world really cares about their feelings. And it’s precisely this disconnect that keeps people from living up to their fullest potential.
All of us have the potential to be successful regardless of how you define success. If you define success as making a lot of money, you have the potential to do that. If you define success as having great and fulfilling relationships, you have the potential to do that. We all have potential.
The problem is, the ideas we choose to hold in our minds that impact our actions differ. Some of these push our lives forward and out. Others hold us down and keep us down. And the more we hang on to those ideas, the more we talk and act a certain way. They become habitual because at some level or another, they yield a reward.
Now, you may be telling yourself, if somebody’s dirt poor or somebody’s struggling financially, where is the reward in that? Well, believe me, there is a tremendous sense of relief when you allow yourself to be rewarded with the cold comfort that you don’t have to try. Can you imagine the pressure you put on yourself when you realize that you can be as rich as other people or you can be as successful as other people only if you put in the hard work? That’s a lot of pressure because you know what comes next. You know that you have to put one foot in front of the other, roll up your sleeves, and get down to business.
Most people are creatures of comfort and creatures of habit. We hate change. And the idea that you’re going to change your routine so you can become more successful and happier is very distressing. So the instant you decide to hang on to what you were doing before or just not try at all, you get that sense of relief. I know that’s a shallow and low level reward, but that’s still a reward. And that’s all your habit needs for you to stay where you are.
I need you to understand how habits work. It’s all about triggers, it’s all about habitual actions, and finally, it’s about the rewards that you get. You see certain things, and you start behaving a certain way, and then you feel the reward or you get the reward. Understand how this works because what follows are the 5 habits of broke and desperate people.
If you don’t want to remain broke and desperate, break that habit. The bad news is that habits cannot be eliminated entirely. They can only be reformed. The only thing you can change is what you do in the middle. You can’t change the trigger, you can’t change the reward, but you can change what you do in the middle.
Habit #1: Expenses come first
If you handle your money in such a way that you pay your expenses first, you’re doing it wrong. I don’t care whether you are able to save only $10 a month, that’s still $10 in the right direction. It’s still a progress against the mindset that you need to pay expenses and liabilities first and then you would possibly think about saving whatever is left. That is too little too late. And that’s why too many American households continue to struggle because they put expenses first. Break this habit asap.
Habit #2: To afford something, you have to cut the budget of something else
Another habit that poor people have is the idea of a zero sum game. Think of your finances like a pie. If one slice gets bigger, the rest of the slices need to get smaller. That’s how you look at your income. That’s how you look at your net worth. That’s how you look at your assets.
What’s wrong with this picture? Well, it should be obvious if you’re not poor. What’s keeping you from expanding the size of the pie? Do you see how this works? Don’t just focus on what exists. Focus on what you can do to expand what you have to work with.
If you believe that you can expand the pie and you constantly work towards that, then you stop thinking that for you to afford something, you have to cut the budget of something. Instead, you believe in buying something so it can inspire you to keep increasing your income.
Believe it or not, there are a lot of wealthy people who started off poor, but they did not let their low income and low net worth get in the way of them buying stuff that inspires them to keep pushing their boundaries.
Habit #3: Take out loans regardless of interest rates
Loans are like any other product. You have to select them carefully. They’re not one and the same. They’re not commodities. Sadly, broke and desperate people look at loans as essentially financial band aids. They’re suffering so they need to take out a loan. It doesn’t matter what kind of loan it is, it doesn’t matter who issues it, they just need to get a loan for a particular day to take care of a particular problem, and they would go on their way.
Well, if you keep doing this, you’re going to put yourself in a big hole that is going to be very hard to crawl out of. There are certain loans like credit card cash advance, payday loans, and other types of high interest loans that can put you financially down and keep you down for a long, long time. Stop looking at loans as commodities. Pay attention to interest rates. Pay attention to the terms. Pay attention to these small differences that can add up to a lot of money later on.
Habit #4: Bankruptcy is always an option
If you think that you have a reboot button that’s always available in front of you, it’s very easy for you to behave in an irresponsible way. Seriously. If you look at your credit card and, at the back of your head, you know that you always have the option of wiping out all your credit card through bankruptcy filing, you are going to be less hesitant to whip out that piece of plastic and buy whatever you want to buy on impulse. At the back of your head, you’re always giving yourself the reboot option.
Poor and desperate people always think that there is this financial parachute, and what happens is they start spending in such a way that they develop really negative spending habits. When they find themselves in a tight spot and they press that reboot button, they find out in the worst way possible that you only get to press it once and you can’t press it again for several years. What happens then? That’s right, you already developed really negative financial habits and you no longer have the luxury of a reboot button.
Habit #5: Spend money now because inflation will eat it up anyway
I know that this habit sounds crazy, it definitely sounds unusual, but believe me, a lot of people think this way. They’re actually quite smart because at least they understand the concept of inflation. However, they use it as an excuse for irresponsible spending.
You can easily say that since inflation is going to be eating up your money, you should save that money and invest it. You should make it grow. The problem with this habit is that it really is an excuse to just spend. It’s an excuse to cover the short term benefit you get from spending. It gives you some sort of intellectual cover for why you do what you habitually do with your money.
Keep the 5 habits above in mind. They happen to the very best of us. However, broke and desperate people tend to have severe cases of them and they also tend to hang on to them for a longer time. Wean yourself from these habits. Change your habitual behavior before it’s too late.
