Your money habits can make you rich or put you in the poor house.
According to a recent study by Brown University, in which nearly 50,000 families were surveyed, most of the habits we pick up in life come from our parents.
This includes money habits.
If your parents had bad money habits, it is likely those habits rubbed off on you.
But in order to change bad money habits you need to first become aware of them.
Below are some destructive money habits that Tom Corley uncovered in his five-year study on the daily habits of the rich and poor that will put you in the poor house unless you eliminate them.
Gambling is not a sound plan to lift you out of poverty.
Gambling relies on random luck.
The odds of winning Powerball are 1 in 175 million.
That’s basically zero.
Seventy-seven percent of the poor — defined as having an annual income of $35,000 or less and a liquid net worth of $5,000 or less — admitted to playing the lottery regularly, versus 6% of the rich, defined as having an annual income of $160,000 or more and a liquid net worth of $3.2 million or more.
But it’s not just the lottery they gamble their money on: 52% of the poor admit that they gamble on sports at least once a week versus 16% of the wealthy.
Time is money.
The rich understand this.
Sixty-five percent of the rich created at least three streams of income during their lives.
Conversely, the poor all relied on one stream of income.
They didn’t invest their time wisely in building their careers or building a side business.
In my study, I uncovered many time-wasters the poor engaged in that ultimately cost them money: Seventy-seven percent of the poor admitted to watching more than one hour of TV each day.
Reality TV wins hands-down. Seventy-eight percent of the poor watch reality TV shows.
The rich, on the other hand, are not big on TV.
Sixty-seven percent watch less than an hour each day, and it’s not reality TV that they tune into.
Only 6% watch reality TV.
Another time waster is the internet.
Seventy-four percent of the poor in my study spent more than an hour each day on the internet.
These days that means Facebook, Twitter, Instagram, Snapchat, or YouTube.
Conversely, 63% of the rich spent less than an hour each day on the internet.
This freed up more time to read for self-education. While many of the poor in my study said they read regularly, 79% admitted that they read strictly for entertainment.
Only 11% of the rich said that they read for entertainment.
Instead, they focused their reading on self-education: biographies of successful individuals, career-related reading, self-help, history, and money matters.
When you’re wasting your time watching TV, on social media, or reading for entertainment, it leaves little time to do productive things like reading to learn, building relationships with other success-minded individuals, via networking or volunteering, or building a side business.
Time does not discriminate.
Everyone gets 24 hours, rich or poor.
The rich simply choose to spend their time differently, doing things that are productive.
Bad spending habits
The rich in my study made a habit of tracking their spending in the early days of building their wealth.
It’s easy to lose sight of where your money is going.
If you don’t have a lot of money you need to get into the habit of tracking every penny.
The poor in my study didn’t.
I uncovered certain poor spending habits that held the poor back in life: Ninety-three percent admitted that they did not budget their spending.
Sixty-six percent admitted that they were not frugal with their money.
They had a bad habit of making spontaneous purchases with their money.
Oftentimes, this required them to use credit cards.
Eighty-eight percent of the poor in my study had over $5,000 in revolving credit-card debt.
Sixty-nine percent used those credit cards to purchase big-ticket items.
And 77% had multiple credit cards.
Conversely, 92% of the rich relied on only one credit card.
Sixty-eight percent of the poor said they don’t use coupons.
Sixty-one percent of the poor did not own their homes — they rented them — while 100% of the rich owned their homes.
When you don’t own you home, you are unable to build home equity, which comes in handy when you retire or to help your kids with college costs.
Poor savings habits
Only 5% of the poor in my study saved 10% of their income.
None saved 20% of their income.
Conversely, 94% of the rich in my study saved 20% or more of their income.
Many of the millionaires in my study started out poor and did not have large incomes during their lives, so this was a habit they adopted while they were still poor.
Fifty-one percent were small-business owners who watched what they spent in order to enable them to save money.
They then invested their savings, as well as the investment income generated by their savings.
After many years, their savings and investments compounded, eventually turning them into self-made millionaires.
Building wealth takes time.
It doesn’t happen overnight.
It took the average millionaire in my study 32 years to become rich.
The younger you are, the more time you have to build wealth.
But that’s only possible if you eliminate destructive money habits and adopt sound ones instead.
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