If you listen to me, any length of time, you have heard me say repeatedly that your ability to build wealth is more about your behaviors, habits, and choices than it is about the money you make or the money you have. And so in this episode, this is going to be probably
eye opening on some of these things. Some of these things might be obvious, but I'm going to break down the most alarming financial habits that I've seen over the years that actually are destroying wealth, destroying your ability to be wealthy, the ability to have that rich life. And I don't want that for you. I think that financial freedom is your birthright. I want to help you claim it.
So we're going to break it down for you. I'm going to tell you what to do instead, how to solve it if it happens to be in your life. Use this as a checklist, all right? And start to change things. Because when we get different behaviors, different habits, different choices, we get different results, especially when it comes to money. So I'm gonna jump to the iPad. Let's get this thing rocking and rolling. This first one is actually about not
being intentional. And what I mean by this is that too often we are just living based upon our checkbook. I remember years ago when I used to do tax returns, and I used to make a house calls for tax returns. And I go to this house, young woman who is a hairstylist that was doing taxes, we are doing her taxes and trying to figure it all out. And I asked her, I said, how much money did you make last year? And she says to me, I don't know. I said, well, we need to know that number
to put it on the tax return. And she says, hold on a second. Let me go look at something. So she gets up from the coffee table that we're working at, and she walks to the back of the apartment, and she's gone for a few minutes, and then she comes back and she sits down and she looks at me. She goes, $30,000. Okay. So I write it down. I said, just out of curiosity, how do you know it's $30,000? She said, well, I went back and I looked in my closet, and I saw all the clothes
I bought this year. And I was looking at it, and I estimated how much I spent on those clothes. And that's how I came up with a number. So. So no judgment. However, that's not good record keeping. That's not good bookkeeping. That is not the way to be intentional. In other words, it was just coming in, going out. And she had no clue at what was happening with money. But a lot of us are doing that. A lot of us are, are living without a clear financial plan or a set of goals or destination
to go to. So what happens is that it leads to aimless spending, it leads to no savings, it leads to haphazard investing. And when you have aimless spending, no savings, and haphazard investing, it's hard to reach financial milestones. So what do we need to do instead? Instead, we need to set clear financial goals. You have to develop a plan to achieve them. So, as I've talked about in my book, building your money machine and on other videos,
I want you to start with the vision of your life. First, what? What do you want your life to be like? Health, relationships, spirituality, energy, all the things around your life, your family, all of it. Define it, set it and say, this is the dream. This is what I want. Then from that vision, you define the plan to get there. It doesn't mean you're going to get there tomorrow. It just means that you're going to create a plan, a map, if you will,
to get there. Then from that plan, you can define the strategy to make the plan work. And then from the strategy, you'll set the tactics and the tactics will set action steps. But too often we don't do that, and we have to start with that. I walk through the whole process on other videos, other episodes, but also in my book and everything. So set the goals. So you are intentional. Every dollar is intentional. Whether it's to pay for a movie, whether it's to pay for rent, whether
it's to pay for a car payment or mortgage, doesn't matter. But it is intentional and it's done upfront. Every dollar has to have a job description. In fact, she worked until, because she loved it so much. She worked until about a year to two years before she happened to pass away. And so she was a pillar at this company. And the question is, how much of your income are you generating? How are you? It leads me to
number two. Okay. Number two is, I think, one of the biggest investments you can make, okay? Not invest, but it's one of the habits that we don't do in financial literacy. When we don't, we can't anticipate or expect to be in control of our financial journey, our money journey, if we don't have an understanding of the fundamental concepts, the fundamental frameworks, the proven strategy, the proven processes to be able to control that. It's like going to a foreign country and thinking you
can get around easily without speaking the language. There is a language to money. There is a language. It's a basic language. It doesn't need to be complicated, but we need to understand some of it. What is net worth? What are really assets? What's an investable net worth versus a regular net worth? What are liabilities, how debt works? Those basics are what I'm talking about. I'm not talking about
sophisticated stuff that you need to worry about. But ignoring financial basics doesn't give you the tools, the skills, or the ability to navigate down the road. So that, what does that do? That puts you susceptible to scams. It puts you susceptible to emotional money decisions, making poor investment decisions, and it'll. And it puts you in a vulnerable position. So here's what I would do to solve this, is I want you to get regular financial
education. Now, when I say that, that means listening or watching this show, my podcast, books, possibly classes, but by and large, there's so much out there at your fingertips that is cost effective. We need to grab it and learn from it. Now, you might say, I don't enjoy that stuff. This isn't about you raising your financial literacy. This is a truly, think about it this way.
It's about raising the probability of living your dreams, the vision that you created, because when we become more financially literate, we have a higher probability of achieving the dreams that we want. So I would work a look at it from that perspective, and number three is not making investing a priority. So, so when we talk about this, what really happens, most people, when they, when
they live their life, here's what they do. They literally will start, and they say, I'm gonna make some money, so they have some income, and then they look at it, and they say, I'm going to spend the money. So they spend it on lifestyle, and then they see what's left, and then they invest. And so what ends up happening is they're investing the scraps. They're creating their financial future on the scraps. And this is something
that we need to be aware of. What you really want to do is take this and this and reverse them. Okay? You want to make investing the priority and the spending on your lifestyle what's left over now? I get it. I can hear you right now, Mel. If I make investing a priority, I won't have enough to survive today. Well, the equation to building wealth is make money. I need the income as big as possible. You're going
to spend money. I get it. But we need to spend less than we make third, I need to invest as much as possible. So make money, invest much as possible, spend less than I make. And if I need to, I need to manage those expenses so I have enough to build that. Now. The plan is going to help you do that, but investing has to be a priority. Think about it this way. The other thing to realize is that the sooner you get in the investing game, the easier it'll be. The longer time you
have, the less money you need. The dollar that you invest at 18 years old, and I get it, you're not 18, goes up 107 times. You invested it at 20 years old, it goes up 88 times. When you invest at 25, it's 44 times. When you invest at 30, it's 23 times. My point is, is that we gotta get in the game. And when we get in the game, we start the clock ticking and the power of time does the work. So investing early, even if it's small amounts, even if it's small, take advantage of compounding
and time in doing that. I just did an episode and a show on your 1st, $10,000 and why it's so important, make sure that we, we hook it up in the show notes. In fact, what you should be doing is make sure that if you haven't done so already, subscribe to this channel, subscribe to the show, get all the goodness that I'm trying to give you because I'm trying to pave the way to financial freedom for you. All right? So make investing a priority. That's, that's alarming habit
number three. Alarming habit number four. Number four is not having liquidity. And what I mean by this is not having money set aside for emergencies. What we call a peace of mind fund. Other people will call it emergency fund. The problem is that you are actually financially vulnerable. I mean, if something happens, literally just weeks ago, my wife comes walking in from walking the dogs and she says, honey, the front looks like a lake. I go, what do you mean? She goes, I don't know. Water's
bubbling up from the ground. I go, what? I go out there and I'm going, right? The what? And it's true. It looked like water bubbling up from under the pavers on the ground. Well, it turned out that a root under, under the ground cracked the main water main coming from the street, and we had water going all over the place. Now, to replace the main water lane line, you have to bore it in and all that stuff. It's an 8910 thousand dollars project. Depending on distance, it could
be more. And so what do you do if you're not prepared and you don't have the cash for something like that? What do you do? You live without bathrooms and showers and all that stuff? No. It's going to force you to go into debt, which erodes your financial security. We need to be prepared. That's why the bottom rungs of the wealth priority ladder in chapter twelve of my book is all about safety.
It's all about creating that unshakable foundation. So when you build and grow your wealth, it's on a strong foundation, and most people are not prepared for emergencies. There's statistics that show that 66% of people could not even afford a dollar 500 unexpected expense. That's. That's not a place to be. All
right, so what do we need to do? We need to be intentional and make sure that we're putting money away to build up a reserve, to build up that peace of mind fund to give you the space to breathe if something happens. All right, number five. Number five. Alarming habit is normalizing debt, y'all. Debt has become a way of life in our country, from. From the individual citizens to our government, okay? It's at all levels. And we accept high
levels of debt as if it's just a way of life. It's not the way of life. It's not the way it used to be. But we have allowed ourselves to get indoctrinated into a debt society, and we play this payment game until the payments catch up to us. And when the payments catch up to us, we're buried. Okay? Especially in a high interest rate environment or a rising interest rate environment. When you have credit card rates at 29, you don't want debt. But too often what happens is that you'll see marketing
people or you'll see car salesmen. They want to talk to you about payment plans. They want to talk, what payment can you afford? What kind of payment do you want? And I get it. But here's what they're really doing. They're not trying to get you in the vehicle. They're trying to remove the friction from your buying decision. When they say, it's $50,000 for this cardinal versus I can get you in the car for $500, and you kind of
go, $500. I can do that. But you don't know the albatross of debt that you took on, and we normalize it. So I look at this and say, hmm, I don't use debt. I don't carry balances. I don't carry debt because if I have to finance something other than a long term assets like a home. And you have to be careful with how you buy a home anyways. But like a home or something like that, if I'm financing a depreciable asset or something, if I have to finance it, it means that I'm living beyond my means.
So I don't finance things. And I think that you need to start to look at and say, how do I restructure my life? So I push away. I don't normalize debt because that debt is going to cause stress and strain on your financial life, but it's also going to cause stress and strain on your psychological life because of the constant payments and that burden and getting into that treadmill of debt, it's, it's a challenge. So you really need to look at it. If you have debt right now, then we
need to put you on a payment schedule. We need to get you in a process that gets you out of that debt. If you're not sure how to do it, I want you to go to melabraham.com. no debt. You'll be able to get a free training, a short free training and an excel template to put your debt in and help
you put yourself on a program. Get yourself out of debt, prioritize getting out of the high interest debt, get out of debt, but also make sure that you're not living beyond your means and going deeper into debt each and every month. Each and every week. All right. That leads me to alarming habit number six. Number six is not tracking your numbers, the ins and outs. Listen, if we're not monitoring it, we can't manage it. And so there's too often, by the time that
you realize that you overspent, it's too late. If you're not tracking it, like, I know what my numbers are each and every day, each and every week, because I'm tracking it. That's what I do. The
challenge is this. If you're not monitoring your daily spending, if you're not monitoring your regular income and you don't know those ins and outs, you're not looking at it, you're not checking the pulse on the patient, as I say, then you are susceptible to overspending, to overextending yourself, which puts you in debt and puts you into a situation where I call it financial leakage. And all of a sudden you go, I don't know how to do this. So what's the solution?
As much as you don't like it, you need to start if it's going to help you got to use some sort of tool, app, budgeting app, but tracking your information. Even if you only tracked it at the very beginning for say 90 days, it will open your eyes to where your spending is. It will open your eyes to where things are going. I had no idea that I spent that much on that. And then you
have the awareness. Now I'm not telling you not to spend. I just want you to spend consciously and intentionally with the awareness of where the money's going. That's all. And now you can sit back and say, do I really want this? Does it make sense or should I be putting it towards my financial future? Right. Number seven. Number seven. And this is about falling prey to temptation. So it's temptation, it's peer pressure, it's comparison, it's social media, it's all that stuff. Here's what
happens. If we have not operated from a plan which we talked about at the beginning then you are susceptible to making financial decisions in the moment for momentary pleasures based on peer pressure or temptation. Why I got a dollar 900 coffee maker in there. But the fact of the matter is that then you overspend. You over buy and you buy things that you didn't want or you didn't need. But you're doing it because, because of social comparisons or temptation or an emotional
buy. And when your emotions go up when it comes to money, your financial intellect goes down. It happens and it happens to the best of us. That's how I got caught in a Ponzi scheme. My emotions got involved. I made emotionally charged decisions without the logic behind it and I should have known better. Wiped out one third of everything I own. I've recovered and then some, alright, but I don't want you to go through that pain. I don't want you to go through that pain. And so we need to look
at it from that perspective. So having a plan in place so you know what your goals are, you know what your spending is. You're tracking the ins and the outs of it will allow you to be empowered to resist the urges that can come in from peer pressure comparison or temptations. And do it from that perspective. Number eight. And then I've got one more for you. Number eight is not getting on the field. And here's what we know. If you truly want to win the game of wealth you actually have to be on
the field playing the game. You can't be on the sidelines, you can't be in the stands. And the problem is that, and this goes back to one of the other habits of financial literacy is that a lot of times we're hesitant to get on the field, to start investing, to get in the game, because we're scared to make a wrong move, to make a bad decision, to maybe we miss the risks and everything, but not only do you miss the risks, you miss the opportunities.
And you don't use time that is on your side and you're not on the field. You can't save yourself, say, save your way to wealth. You have to invest your way to wealth. Saving isn't going to work. $5,000 a year. $5,000 a year over 40 years, okay, in an S and P 500 fund will turn into a million and a half dollars. But if I put it in a 2% savings account, it'll only turn into $314,000. 314,000. The difference is astronomical. You must be on the field. Now, that means that you
go well, I don't want you to just jump in recklessly. It means raise your financial literacy. Understand the simple ways to invest. Look for the long term strategies that have proven and over and over again and up markets and down markets to work and get in the game, even with low, low money, to start, to build the confidence to prove that you can do it. Follow a provenity recipe, a proven process. Approving. If you're not sure where there is one, go get my book, because I break it all
down for you and I give you the process. All right, number nine, this might surprise people. Not understanding taxes. Okay? Not understanding taxes. And I put this in here because. Primarily because taxes are a big number. If you're making a lot of money and you live in a high tax state, $0.50 or more could go to the government. And even if you're not, and it's $0.20 or $0.25, that you're at a 25% bracket or to 50%, any of that type of stuff. Here's the thing. The tax code was
created to be followed. Doesn't mean to be scared of it. It should be used for. It was meant for what it was meant to be used for. That means if you have a viable tax deduction, take it because you're going to save money. You're not giving it to the government. But when you're talking about someone that wants to rob 30%, 50% of your money in the form of taxes, it's important for us to understand. Now, it doesn't mean that you need to be a tax
specialist. You just need to be informed enough and have the right forward thinking advisor that can guide you and help you navigate how you're like, I just looked at a. At someone's tax return. Yeah, I just looked at someone's tax return for another matter, to kind of help them out. And I'm looking at this tax return, and I realize their CPA have them, has them in a wrong entity and they are paying way too much in
taxes. And I said, if we just converted you to an S corporation, we would save you $20,000 a year. Understanding taxes is an important aspect, and a lot of times it's complicated, and it is. Look, the tax code, I'll give you that. It is complicated, but there's some basic things, and having the right advisor, having the right consultant that can sit you down and say, here's the things that apply
to you. Here's the things to do to make them viable, to take the deduction, it's going to allow you to make sure that you keep as much in your pocket that is legally possible. You are required to pay your taxes, but you're not required to overpay them. All right, so those are the nine alarming habits that I think silently erode our wealth journey if we're not careful. So you can look at these and say, I have one, two, three, maybe none of them, it doesn't matter. But use this as a
checklist. I gave you the solutions to each get yourself in the game. Do the right things. Take control of it, because it is your behaviors, your habits, your choices that will drive your wealth journey far more than your cash and your income. We need it. We need the cash and income, but let's use it in the right way to get you the wealth. I hope that you found this of value. I hope that this helps you on your journey to financial
freedom. Remember, I believe that financial freedom is everyone's birthright. We just got to go out and claim it. And I'm here to help you light that path and guide you on that path to financial freedom until I get a chance to see you on the road or at one of my next speaking gigs. Always, always strive live a life that outlives you. See you in the next one. Thank you for listening to the affluent entrepreneur show. With me, your host, Mel Abraham.
If you want to achieve financial liberation to create an affluent, affluent lifestyle, join me in the affluent entrepreneur Facebook group now by going to melabraham.com group, and I'll see you there.