9 Bad Money Habits That Are Keeping You Broke

9 bad money habits are keeping you broke, and the worst part is they all feel like you're doing the right thing. That's the trap, and most people never even see it coming. You save your money, you pay down your debt, you live within your means, and somehow, somehow the wealth never seems to build, and you can't figure out why. So I'm going to show you why. This is Building Your Money Machine, where we help you master your money, eliminate financial stress, so you can live a life of choice. Because earning more doesn't make you free. A money machine does. And I'm your host, Mel Abraham. And after 30+ years as a CPA, an entrepreneur, a money mentor, more importantly, as someone who's walked the path, the financial freedom path, from nothing to something, then broke it and had to rebuild it, I've seen what works with real wealth. And it's not about bigger numbers. It's about bigger and better choices. So let's jump in. Let's break down the habits and let's get you on the right track. Let's do this. You know what's more dangerous than a bad money habit? A bad money habit that feels like a good one. Because here's the thing. The habits we're going to talk about today, they're not the obvious stuff. Nobody's going to make a video, or I'm not going to make a video about roasting you for buying an avocado toast. I like myself some avocado toast at times. So that's not what's keeping you stuck. What's keeping you stuck are the habits that feel responsible. They feel smart that they're the ones that your parents would have even praised you for. And that's exactly why it's so hard to catch, because they don't trigger some alarm. They actually get applause. So today we're going to break down 9 of them, 9 bad money habits that may be keeping you broke, but they look good. They're hiding in the costume of doing the right thing and we just need to nail it. All right. So let's get into it. With habit number 1, and that is saving money in the wrong place. And I hear it all the time. I'm a saver, Mel, and I love hearing it. I do. And I'm about to ruin it for you just a little bit because saving isn't enough. We hear this all the time. It's not how much you make that matters, it's how much you keep. And it's true to an extent, but it really isn't how much you keep either. It's how much you get working for you that really matters. So where you save matters just as much as how much you save. And most people who call themselves disciplined savers, they're parking their money somewhere that is quietly working against them. See, I had a conversation not too long ago with a woman, with one of my clients, Jane. She's smart. She just came to me. She's hardworking. She's proud of her savings discipline. She's doing all the right things. And she told me that she had almost $50,000 set aside. 4 years of consistent savings. She felt great about it and she should. And I asked her, well, okay, so you have the $50,000, where is it sitting? And she says, well, it's in my Banks savings account. And I didn't say anything for a second because I knew that at a standard bank savings rate, that $50,000 maybe earned her a couple hundred dollars and that's it. Meanwhile, at the same time, inflation is just eroding it away, taking a bite out of every single dollar. And she actually is losing money on paper. She's losing ground in real terms, but it's not her fault. See, she did the hard part. She saved, but nobody told her that the destination matters. Also, think about this. The average savings rate, uh, at the time of this filming is about 0.39% in a traditional savings account. The average savings rate for a high-yield savings account is about 4 to 5%, depending. Okay, well, that $50,000 in a traditional account's only going to earn $195, but in a higher-yield savings account, at 4.5%, that's going to earn over $2,200. So here's the principle. There's a difference between storing money and growing money. A high-yield savings account, a money market fund, a short-duration Treasury. These aren't complicated and they aren't risky. They're just smarter parking spots for your cash. And right now, high-yield savings accounts are paying something that's more meaningful than the average bank account. Now, It gets eroded by inflation. So I'm not saying that, that it avoids the inflation, but if we are looking to keep our liquid funds, our emergency fund, our comfort fund, our peace of mind fund, the liquid funds that I needed in 1 year, 2 years, maybe 3 years in a safe place that's earning more than 0.39%, then we got to put it somewhere else. Okay. That's the game that we need to to play. So don't let discipline get punished by inertia. Moving your savings somewhere that keeps pace with inflation at least isn't being aggressive. It's just being awake. It's allowing you to get your money to start working for you at a level that you want it to, so you can deploy it in, in other places. Now, again, this is for our liquid funds. This isn't for our invested funds. We'll talk about investments. In a moment. But the bottom line is, where are you putting your cash? It shouldn't be in the traditional bank. It shouldn't be in a checking account, traditional savings account. Let's put it somewhere that makes you more than inflation. So at least you're not falling behind. Habit number 2. This is a big one. Paying off all your debts before you start investing. And I know that there's a lot of personal finance gurus out there that are telling you, hey, pay off your debts before you start investing. And it sounds like a responsible thing to do. And mathematically, It makes sense because it'll get you out of debt faster because you're putting everything towards that. And we're just going to pay the debt first. Then you'll take time to invest. And totally logical. Totally admirable, too. And for some debt, it's totally right. But here's the trap. Treating all debt like it's the same becomes a problem. Not all debt is created equal. Your 24% APR credit card is different than your 4 or 5% mortgage. They're just not the same creature. One is a shark eating you alive. The other is a goldfish. So you don't fight them the same way. So here's where I call the distinction between destructive debt and productive debt. Destructive debt is debt for lifestyle consumables, personal loans, car loans, credit cards, the things that are high interest, things that depreciate, things that get consumed, and you have nothing left over except the debt. That's destructive debt. And typically the interest rate on that destructive debt is punishing. It's huge. And the math will eat you alive. And this is where we need to attack it aggressively. But if I have a mortgage at 3.5%, a student loan at 5%, a business line at 6%, what do you do? Now, look at it. I'm a CPA and I love numbers more than most people might love pets. Although, I'm a dog lover to the end. And the math here is really clear. If the market historically is returning around 10% annually on average and your debt is costing you 5%, paying the debt off isn't— instead of investing means that you're giving up a 5% spread every single year. Now, compounded over time, that's a leak that you can't see. Here's the approach that we like to take for two reasons, and I'll explain it to you. It's a dual approach. I want you to eliminate the destructive debt aggressively. That means that you're going to take on a debt payment plan, either using a snowball method or an avalanche method, to start to get out of the destructive debt and never get into it again. But at the same time, I want you to start building your liquidity and your wealth simultaneously. Here's why. Your debt management muscle is a very different muscle and mindset than your wealth creation muscle. And when we are just exercising one muscle, it's like the dude that goes in the gym and works out his upper body and never works out the lower body. It's totally fine, looks good until he puts shorts on. And so that's the problem with this. And the second problem is that you're not training your habits and your behaviors for wealth creation, you're training it for just debt management. I want you to train them simultaneously. That doesn't mean that if I have an extra $1,000, I'm gonna put $500 towards investing and $500 towards the debt. They may not be equal. I might put $900 towards the debt and $100 towards investing, but I'm still exercising both tracks at the same time. Because here's the truth, um, when you wait, you don't have time in the market. And time in the market is something that you can never get back. Every year you sit out, every year you sit on the sidelines until the debt is gone, is a year of compound growth that's working for someone else and not for you. So sequential debt and then investing is a mirage. Simultaneous, that's the machine. All right. Habit number 3, budgeting Without building. Okay. Budgeting. And this is like a curse word for a lot of people. It just, it gets their skin to crawl. And so, oh, you're going to put me on a budget. Everyone's favorite financial virtue. And I want, I want to mess with it a little bit here because I'm not a believer in budgeting. I'm a believer in planning because budgeting, though it's genuinely good. I'm not here to tell you to stop buying things. I'm not here to tell you to stop doing things. But here's the question I want you to sit with. What is your budget actually building? Is it just about managing the cash in and the cash out and we're not building something? See, most budgets are built around subtraction. What can't I spend? That's a mindset of like, where do I cut? How do I stop the bleeding? And if that's all your budget does, then it's just containing the damage. Then congratulations. I mean, I get it. You have an airtight cage for your money. But that's not a wealth plan. That's a spending prison if we're not careful. And I've talked to people who have meticulously budgeted for years. They color-coded their spreadsheets. Every category is tracked. Every coffee is accounted for. And yet their net worth barely moved because the budget was designed to manage the outflow, not to direct the money towards anything that we're building. A budget isn't just a spending plan. It's a wealth deployment plan. Every single dollar you earn needs to have a job, either funding your life today or building your machine for tomorrow. Not just a don't spend it here type of mentality. It's about building something by sending it there type of mentality. And when you build your budget with that lens, It changes. You're not just subtracting from expenses. You're actively directing dollars towards your comfort fund, towards your investing, towards your asset building, towards building that money machine. Less money in the expense column. Great. But more money in the asset column. Phenomenal. That's what the machine looks like. The budget isn't the goal. The budget is simply the routing system. And making sure it's routing it towards something meaningful. Leads me to habit number 4, playing it safe with your investments. Oh gosh. And this is something that I hear a lot. Ah, I'm conservative with my money. And my response to that is always this. Okay, but have you counted the cost of being that conservative? Because playing it safe has a cost. Playing not to lose has a cost, and it's just a cost that never shows up on a statement. It's invisible, it's slow, it's insidious, and it's absolutely devastating over time. See, people will say the market's too scary, it goes up and down, and I get it because when the market drops, I feel terrible. But you know what? You know, it, it's not as scary as running out of money at 79 years old, at 70 years old. That's the scary story that nobody tells you about. Here's the thing about risk. We usually measure it in the wrong direction. We think about the risk of what I could lose. And almost nobody asks, what am I guaranteed to miss if I stay on the sidelines? And I did this once in my life and it cost me millions as I sat on the sidelines out of fear. See, the real risk isn't volatility. The real risk is inflation and time working against you while you're sitting on the sidelines being cautious. A dollar invested in a low-yield savings account or instrument in 1990 grew only a few dollars by 2020. I mean, decades later, that same dollar invested in diversified portfolio was multiples of that, significantly more. Same time horizon, same action. Just a different outcome based on a different decision. Now let me be clear though, I'm not saying to throw everything into volatile assets and pray. The risk tolerance, risk capacity, all of that, as I call it, the risk triad, is real. Your timeline matters, your circumstances matter. But most people who call themselves conservative investors, they They aren't making strategic decisions. They're making fear-based decisions dressed up in the language of responsibility. And there's the difference. One is a plan, the other is avoidance with a name tag. So risk-adjusted, age-appropriate, circumstance-appropriate investing is not gambling, it's math. And the math almost always says you can handle more than you think. All right, habit number 5: wait until you have enough to start investing. Oh my God, I hear this so often. I'll start investing when I have more to invest. Dang it, this one is so common and so costly because what's happening is they're delaying getting in the game. And people, when they say that, they want to— they want to feel like they're doing something meaningful, and yet They're not like $50 a month is embarrassing is what they're kind of saying. Well, here's the, here's the deal. What they don't realize is that they're not delaying investment. They're delaying a habit, a behavior. And that habit is worth more than the money. The habit of putting money away, even if it's $5, $10, $20, what you're doing is developing the wealth creation behaviors that matter long-term. Waiting until you have enough to invest is like waiting until you're fit enough to start exercising. When I get, when I get in shape, then I'll go to the gym. Logic doesn't work. And so it's, it's not gonna work here either. Let me give you a little math so it starts to hit home. Someone who starts and they start investing $200 a month at 25 years old, just $200 a month, $50 a week ends up dramatically more— with dramatically more money at age 65 than someone who starts investing twice at $400 a month, but they wait a decade. They start at 35. The person who waited doubled the amount they put away, but they still end up behind because they waited 10 years. That gap, that's not strategy. That's a decade of compounding growth and had —habits not being developed that nobody can give you back. The amount is almost irrelevant in the early years. What matters is that the account exists, the habit is running, and that time is on your side. $50 a month into an index fund or a low-cost ETF today is not nothing. It's the start of a system. And systems, not amounts, are what build wealth. You don't need enough money to start investing. You need to start investing to build enough money. Flip that around and let that land. Okay. So then go and open the account. Now I get it real quick before we keep going. Uh, you've been nodding along and thinking, okay, okay. So where am I actually on, on this journey? This is something that I think people need to know is where are you on the financial freedom journey? And I've got you. I've got free resources that is available to you. Takes about 2 minutes called the Financial Freedom Zone Quiz. You go answer some questions. It'll give you your next steps, what to focus on, and some training along with it. Totally free. Go to yourfinancialfreedomzonequiz.com. I'll hook it up for you here. All right, let's get to habit number 6, diversifying into confusion. Oh my gosh, this is interesting because I've had these These folks come in and say, "I'm totally diversified." And great, diversification is our friend when it comes to reducing risk. We don't put all our eggs in one basket, but how many things do you own and can you explain any of them? When I first moved from my wealth team, there was a point where I had, I don't know, probably 32 different investments and investment accounts. It was complex. It was, it was unique. It was amazing, but it was hard to understand. I understood it, but even my new team looked at it and says, what are you doing? Simplification is your friend. Diversification in a simple way is important. You don't need 15 accounts. You need 2 to 5 Funds. That's it. Diversification is generally good in financial practice. Real diversification, spreading the risk across asset types, geographies, sectors that reduces volatility and protects you over time. But there's a point where it's this counterfeit version of diversification and you're just collecting assets and you might have 15 mutual funds and they all hold the same underlying stocks. They all have Apple, they all have Microsoft, they all have, uh, Google. Well, when you put them all together, that's not diversification. It's just having accounts scattered across 4 different brokerages with no coherent strategy. So buying a little of everything you've heard it might be good isn't— it's not covering your bases. That's not a portfolio. That's a junk drawer with a Roth IRA label on it or a brokerage label on it. So Confusion isn't diversification. Simple strategic asset allocation will get you to diversification. Complexity isn't sophistication. Owning more things you don't understand doesn't reduce your risk. It actually masks it. It hides it. Okay? So asset allocation that matches your timeline, that's the game you want to play. Real diversification means understanding what you own and why you own it. The broad market index, a mix of domestic and international exposure, those kinds of things. It doesn't have to be complicated. It needs to be simple. It needs to be understood. It needs to be intentional. And it will beat complexity, scattered, confusing every single time. And when you can explain to me your investment strategy in 2 sentences or 3 sentences, you have a strategy. When you can't, you have a whole lot of noise. All right. Habit number 7, being financially responsible for everyone else first. This is going to sting for a few of you. I'm gonna say it anyway because I care too much not to. There is a version of generosity that looks like responsibility, but it is actually self-neglect. And I see it most often in people who are caregivers, their parents, their adult children taking care of aging parents, spouses carrying the financial weight of their household. Their habit looks a lot like this: helping a grown child with their rent repeatedly. I'm not saying once in a while, I mean repeatedly. Funding a family member's temporary crisis that actually becomes permanent. Saying yes to everyone else's financial need while your own retirement account sits empty. Putting the college education costs ahead of your retirement costs. This is a big one, and then that why the wealth priority ladder is built the way it is. And I know that it rubs some people the wrong way, but there are multiple ways to pay for college education, including jobs, working, scholarships, all kinds of things. There are not multiple ways for you to pay for your financial future, your retirement. You know, there's a reason on an airplane they say, put your own oxygen mask First and then assist others, because a passed-out helper helps no one. And I literally had a client, brilliant, brilliant woman that came in, Lisa. She, she had a generous heart. She had worked really hard. She had been quietly supplementing her adult son's rent for 4 years, enabling him, not a little, I mean thousands of dollars a month. Meanwhile, her own investing had basically stopped. She told me she didn't feel right building her wealth while her son was struggling. And I asked her, well, what happens if you run out? Who takes care of you? Who takes care of him then? Now that hit differently. I get being generous and I want to be generous, but generosity from a position of strength is sustainable. Generosity from a position of sacrifice over time leaves everyone vulnerable. You building your machine isn't selfish. It's what makes you useful to the people you love for the long haul. My mom was in assisted living. She was on dialysis for 6 years. That assisted living cost and the treatments cost over $850,000. Having a machine in place to make sure that that could be funded and be sustainable was, was important, but that required some discipline upfront and not overly generous to the, to to the detriment of being able to take care of things long, long-term. Set your financial boundaries, fund your own financial future first, then give from the overflow, not from your reserve. Habit number 8. Habit number 8 is avoiding the money conversation. Wow. I just did a podcast interview and we had a depth, uh, an in-depth conversation about this, that most couples manage their finances in a quiet parallel. Not together. But the problem is, is that there's conflict there. They're just separate. They're silent. They're not even having a conversation. It's one of the key elements. When I do my keynotes, a lot of times one of the first things I tell people do is go have a conversation with your spouse, with your intimate partner. Open up the dialogue around the money, but not about the money itself, about the life that the money is to build and to make sure that you're sharing a vision for a life that matters. Because one person handles the bills, the other person handles the investments, neither handles anything intentionally. And all of a sudden it just kind of happens month to month, year to year, and nobody really knows the full picture. And there's stress and there's angst and there's a lot of unspoken things and nobody brings it up because the last time they did, it turned into a thing, you know? And that financial silence in a relationship, it's not peace. It's a slow leak. Two people in a house with two totally different ideas about money is like two pilots in a cockpit who never agreed on the flight plan or where they were flying. They might stay in the air for a while, but eventually someone's going to notice that they're heading the wrong way. So, and when you look at this, Research backs this up pretty clearly. Financial conflict is one of the leading predictors in relationship stress and divorce. And the couples who struggle the most aren't always the ones that, that fight about money. They're the ones who never talk about it. The conversation doesn't have to be a summit meeting with spreadsheets. It actually should be a meeting about your life. It actually should be about what it means in the life you want to create and what it takes to do that and your roles in doing that. So you're, become shared in the goals, in the vision, in the values, in language that you have. And then you share the system to make it happen. And when two people in a household are rowing in the same direction instead of different directions, things work differently. Because if you're rowing in different directions, you're just spinning in circles. Alignment isn't just nice. It's financially efficient. It removes friction. It builds momentum. Have the conversation. And do it regularly without blame, but with curiosity, because building a money machine as a team is exponentially more powerful than building it alone. And it's nearly impossible to do it if you're all quietly working against each other and you don't even realize it. And that leads me to habit number 9, optimizing your income instead of building assets. And this one's a big one and one that I see that most high achievers. I see them, see it happen. The people who are doing everything right, yet they still don't have real wealth to show for it. They're working hard, they're in the— on the treadmill, they're earning, and they're trying to increase their income, better at their craft, more clients, more raises, optimizing every single hour. The income grows and grows and grows, and yet their wealth doesn't grow at the same time, and they can't figure out why. Here's why. They're optimizing the wrong thing. See, a few years back, I almost lost everything. You know, not metaphorically, actually lost it in a Ponzi scheme. One-third of everything I owned. And the thing is that my financial survival depended entirely on me showing up, working, producing income, income, income. One bad diagnosis, one market shift, one personal crisis, and I was close to zero. I had to build an, an earnings machine, but I needed to build the money machine, and I was too focused on the earnings machine alone. We need both the earnings machine and the money machine. There's a difference between earning money and having money earned for you. The money machine makes money when you work and when you sleep. The earnings machine only makes money when you work. Income is the raw material for your wealth. That's the game I want you to play. High income is just a shinier leash. Earn income, profit income, interest income, dividend income, rental income— these are the, the tracks your money travels when it's working for you, not the other way around. You don't need to earn more to build wealth, you just need to deploy it better. See, the goal isn't to be the highest paid person in the room. The goal is eventually to not to be in the room at all because your machine is running. So here's what I wanna leave you with. I went through cancer twice, and I'll tell you this, in those moments, the thing that I was grateful for wasn't the income I had earned. It was the systems I built, the assets that kept working, the machine that kept going when I couldn't, when I chose not to. That's not a finance lesson. That's a life lesson because this isn't really about money. You know that, right? Money is just the vehicle. What we're actually building is time, choices, the ability to present for people who matter, to do the things that matter, to be present in their lives, to wake up and live the day the way you decide it, not the day your income demands. If your income stops when you do, You're not free. You're rented. 9 habits, all of them hiding behind the costume of responsibility, all of them quietly working against the life you're actually trying to build. The good news is you don't have to fix all 9 today. Pick the one that stung the most, the one where you, you thought, oh man, that's me. Start there because earning more doesn't make you free. The Money Machine does. And building it starts with knowing the difference and the difference between just what feels smart and what actually is. So, do me a favor. Drop me a comment. Let me know which one of these have your name on it. Which one you're going to start with first? Which habits stung a little? I read every single one. I want to know. I want to have the conversation with you. And if this landed for you, share it. Someone else out there needs to hear this because most people are not doing things wrong. They're doing things that are the right things. They just are wondering why it's not working, and now you know why. Let's give them that gift. Okay, pick one habit that's yours, just one, and go out there and change it this week. Let's build it. Let's do it together. And I look forward to seeing you in another one or on your path to financial freedom. And until we do, as I always say, always, always strive to live a life that outlives you. See you in the next one. Cheers for now.