FINANCIAL ADVISOR REVEALS - Money Habits That Keep You Broke

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All right, over three decades as a financial advisor, as a cpa, as a valuation professional, valuing businesses and helping build and scale businesses and build wealth, had a chance to see a few things. And what I've noticed is that there are certain habits that will get you ahead and there will certain habits that could be holding you back. And in this episode, in this video, I actually want to walk through some of the habits that could be holding you back from the financial freedom. You deserve to talk through the habits that might keep you broke. And so one of the first things I want to do is start to break this down for you. Because when you start to fix these things, you might see a whole different result in your bank account, in your investment account, and in your life. So let's get on with it. All right, so the first thing is this, not tracking the numbers. If you're not tracking your information, your numbers, then you don't know where you're at. Think about this. Can you imagine what it would be like? You say, hey, I'm, I'm in, uh, I, I live in Laguna beach, so I'm, I'm, I'm in Laguna Beach, California. I want to go to Chicago. All right, but what if I didn't know what my starting point is? What if I didn't know I was in Laguna Beach? What if I was, I was just dropped somewhere, I don't know where I'm at, and I say, I want to get to Chicago. I'll never get. If I got to Chicago, it would be pure coincidence, because without knowing where I'm starting from, I don't know how to get there. I don't know how to put a plan in place or a strategy in place to get there. And yet that's what we do with our money. Then the other side of it is, okay, let's assume that I know where I'm starting from. Say I'm starting from Laguna and I want to go to Chicago. I map it out. If I keep my head down and I never look at the signs on the roads, how do I know I'm on the right path? Same thing with your money. So here's the thing. If you're not tracking the money that's coming in, your income, the money that's going out, you're spending the assets, the things you own, and the liabilities, the things you owe, then you're in a challenging place to really be able to navigate your path to financial freedom. Because the folks that I see that are on the path to financial freedom or have gotten to financial freedom are living a rich life, an affluent life, as we call it. They've tracked their numbers. They know what's going. What's coming in. They know what's going out. They know where it's going to. They're managing it. They know how much in assets they have. The money machine, if you will, that's. That's building it. And they know who they owe and how much they owe. And they have a plan in place. So, number one habit is if you are not tracking your numbers, number two is not making investing a priority. And so what I mean by this is this is that too often, here's how most people live their life. I make money, I get my paycheck, I put in my bank account. We go out. It's Friday night, I'm going out. We go out, we. We spend the money. We buy stuff. We are swiping on. On Instagram, we see an ad, we go, I'm buying that. And then at the end of the month, we see what's left. Sometimes we have something left, sometimes we don't. And whatever we have left, then we invest. So what's happening is that most people will live their life where they earn money, spend money, invest what's left over, y'. All. That means that you're investing the scraps. That means that your whole financial future is built on scraps. I don't think you want to do that. If you look at what the wealthy have done, if you look at what the rich are doing. What they do is they swap it. They make investing the priority. So they make money, they carve off the piece for their investing. In our case, we tell you 20 to 25% and whatever is left over now they, they use that for their spending. Now I get it, I can hear it right now. But Mel, if I did that, I can't pay my bills. Ah.

All right, so there's two ways to solve that. One, we figure out if we're overspending in certain places and we need to adjust the bills more, more appropriately. And probably the, the better thing to do is how do we find a way to get a bigger shovel of income. In other words, raising our income so we can actually have both funding the future, investing a priority, and the lifestyle we want today. What we don't do is we don't put it on credit cards. All right, so that might mean that you have to get a side hustle or some sort of side gig for a period of time to get you stabilized. Or you, you look at your job and say, how can I get paid more? Don't go ask for a raise. How can you provide more value so you are more valuable and worthy of being paid more first? So the value you create is going to proceed. You asking for that raise. So create value, get paid more. So bottom line is that make investing the priority. So that's number two habit that I see. The third habit is not having a peace of mind fund or what I would call liquidity, meaning that, and some people call this an emergency fund. I call it a peace of mind fund because it gives you peace of mind if you don't have cash available to you. High yield savings account is where we usually put it. And something happens, something that's more tragic, not, you know, not a small thing that that happens, but something that maybe you're. You lose a job and it's going to take you two months or three months to get back on your feet. Maybe you have a health scare like I did and you got to shut things down, or you have something that is, is more prolonged. If you don't have the liquidity to carry yourself through those downturns, you have a, you have a challenge. And so one of the habits that can put you in a, to a precarious position is if you don't have the liquidity, the peace of mind fund, the emergency fund, whatever you want to call it, to make sure that you can sustain yourself during uncertain or down times, okay? Because it's going to happen. Typically, you know, it's just the way life is. Things happen. Fact is, is that most bankruptcies are a result of, you know, medical expenses that can't get paid. A lot of, a lot of that happens. So having that liquidity is going to be really important. And not having it is one of the habits that I see that can keep people in a situation where they're broke. Number four, you know, you're buying decisions. Okay, how are you making your buying decisions? If you're making your buying decisions based on what others are doing, what others are doing that's gonna keep you broke. Our buying decisions need to be based on us. What do we want? Not. And look, I'm, I, I'm no, no different to y'. All. I'm human. I do the same thing. There is a reason I got a 900 coffee maker in that kitchen over there. And it's because I was on this app and I go, oh, that looks cool. I can do a coffee from my phone. I can make a coffee. I can make a coffee right now. And what do I do? Order it. See, the challenge is that too often we allow others to define our buying decisions through their marketing, through social media pressure, through comparison, through all of that. And when we do that, we tend to do things with our money that we didn't intend to do. Keeping up with the Joneses, those kinds of things. Joneses are broke. Let's not keep up with them. So, so making sure that your buying decisions are your own and not influenced by what others are doing becomes important. That leads me to this next one is carrying credit card balances. Credit cards. You can use credit cards. You can use credit cards that just fine. We. I use credit cards. So I'm not saying get rid of all your credit cards. I will say if you can't handle the credit cards, then get rid of it. But what I don't want you to do is carry credit card balances, especially with, with rising interest rates. When you have a balance where there's an interest, say I have $1,000 on a credit card and now the interest rate on that credit card is, is 25, 26, 27%. It's going to take you years to pay that thousand bucks off. And by the time you're done, you'll pay $2,500 on a thousand dollar purchase. The fact that you had to put it on a payment plan for a consumable tells me that you couldn't afford to pay for it in cash, which means that you're borrowing from your Future, to live it today. I think we need to flip that. So carrying credit card balances is a parasite to your, to your financial future. And so it's important you're going to use credit cards, pay them off. But be smart, be diligent, be vigilant, do it the right way, don't care, don't carry credit card balances. Then number six is understanding the difference between savings and investing. Okay, here's the thing. A lot of people will say, well, I'm saving. So they take money and they put it in a savings account or even a high yield savings account. But even when you get 5% in a savings account, you're leaving money on the table because it's not invested. You cannot save your way to financial freedom. You have to invest your way to financial freedom. Now saving has an important place. I have plenty of cash in a savings account, in a high yield savings account for my peace of mind fund, for opportunities for other investments, for taxes, for all, all kinds of things that I need it for and I need it safe and I need it liquid. That's not what I'm talking about. But there are times where people will sit back and say, well, I don't want to necessarily lose money. So what they do is they take their 401k and they put it in a money market fund that's getting 2%, maybe 3%. That's not going to get you to the numbers you need to get to to be financially free. You have to put it in to work for you in a harder way, if you will. The idea, remember the money machine, is when your money works harder for you than you did for it. Now that doesn't mean you take on undue risk, but when we look at long term returns in the stock market, that's 8 to 11%. So if you're not going to need the money for a decade or more, allow time and the market to do its work and so realize that there's a difference between savings and investing. Then number seven is understanding that taxes, taxes are like that little pac man is eating away at your wealth. And so it becomes important. I don't want you to be tax specialists, okay? That's not your job. But we need to have enough understanding to do some things to make sure that we're not paying more than our fair share. There are certain ways to structure your income, certain ways to structure your, your, your life, your business, to reduce the taxes legally. Think about it this way. If the maximum tax rate is in the 30, 30 plus percent range, and like in California, state rates, 13%, you're approaching 50% or more in taxes. So for me to have the ability to, at least in a comprehensive manner, be able to have a conversation with tax advisors and say, you know, are we taking advantage of all the things we can to reduce taxes to the tune of 50 cents on the dollar? It's important because if I can save $5,000, if I can find something that's a deduction for $5,000, it saves me $2,500 in taxes. If I'm at a 50% rate, well, that $2,500 in taxes, I can reinvest and allow it to grow. So taxes is a big part of making sure that you're on the road to financial freedom. And when we turn around and say, I'm just at the whim of the tax code, we put ourselves on a ride where someone else is carving and chipping away at our wealth at percentages that we don't want them to do. So I don't want you to be a tax expert. I just want you to be tax informed and ask the questions and say, are there things I should be doing to your cpa, to your tax preparer? Are there things I could be doing? What can I do proactively? How do I reduce? How do I keep more money in my pocket? That's the key. All right, and then the last one, I think is the, well, what I call the wealth flatline. And what we need to understand is that there's something called the wealth flatline. It looks like this. And this segment here, this segment here is what I term the, well, flat line. Okay? It's flat. It's flat. This is where you start your investing. You know, we're putting money in, we're putting money in the 401k, we're putting it in an IRA. We're putting in the pension, we're putting in the. In the accounts. And you're going, I've been doing this for years and all I have is 67 more dollars. It hasn't gone anywhere. And guess what? What ends up happening is that we lose patience. We get irritated, we go, this stuff that Mel's talking about doesn't work. And what do you do? You stop. Worse, you do what I did, you cash out. Cash out, take it all out and spend it. What I did, I ended up in Japan. It was a great trip, but when I look at. I should have kept it invested. What it would have done, it cost me a lot. Here's the problem with either stopping or. Or cashing out is that you actually put yourself in a situation where you end up back at the beginning again. You will never get to this acceleration zone of wealth without passing through the flat line. And the only way to pass through the flat line, four letter word time. And so this habit that keeps folks broke is this belief that you have time. I'll get to it later. I'm only in my 20s. I'm in my 30s. I'm not retiring for another 30 years. I got time, y'. All. A dollar saved at 20 can turn into 80, $90 by 65. If you wait a decade, that will cut in half. Half. Get on the wealth flatline as early as possible. Stay in the game. Time erodes it. Then you get to the acceleration zone. That's where your money works harder for you than you did for it. That's the key. So these are the habits. These are the eight habits that I see that can keep people broke. And when you start to understand that, recognize them, break those habits, replace them with, with wealth creation habits. You'll find yourself on the path to financial freedom in a way that you wanted. All right, I hope that this serves. I hope that this helps. I hope that this gives you some perspective to sit back and say, you know what? I'm going to examine my life. I'm gonna look at the way I'm doing things, and I'm going to take control. Now, you may not get it all done in, in one clean swoop, but one step at a time. We stay on that, well, flatline. We stay on that path to financial freedom. You stay guided. You're not alone. You're not siloed. You're not isolated. We can do this journey together. All right? So stay with me. Stay with me. And in, in. I'm going to keep putting out this content, but stay in the game. We'll get you there, all right? Because your dream's coming. All right, listen, financial freedom is your birthright. Let's just go out and claim it. I can help. All right, Till I see you in another episode, another video on the road or when I'm speaking, always, always strive to live a life that I lose you. Cheers. Thank you for listening to the affluent entrepreneurship with me, your host, Mel Abraham. If you want to achieve financial liberation to create an affluent lifestyle, join me in the affluent entrepreneur Facebook group now by going to melabraham.com group and I'll see you there.

And that's it for this episode of building your money machine where we help you learn how to master your money, eliminate financial stress, and live a life of choice. If you found this valuable or helpful to you, here's what I'd love for you to do. If you do me a favor, go to Apple, Apple Podcasts, or wherever you're listening to this podcast and rate and review the show. It helps us tremendously to keep us at the top of the list so we can continue to get this information and this message out to people. Because I truly believe that financial freedom is your birthright and I want to help each and every one of you claim it. Thanks so much.