FINANCIAL ADVISOR REVEALS - Money Habits That Keep You Broke

Dive into the fundamental money habits that could be keeping you from achieving financial freedom in this eye-opening episode. From the importance of tracking your numbers to making investing a priority, Mel takes you through the habits that could be holding you back from the financial freedom you deserve. 

This episode empowers you with real, actionable steps to break these habits and replace them with wealth creation habits. 

Understanding the difference between savings and investing or the impact of taxation on wealth creation, Mel provides insightful guidance to help you take control of your financial future.

IN TODAY’S EPISODE, I DISCUSS: 

• The importance of tracking your financial numbers
• Making investing a priority over spending
• The significance of a peace of mind fund for financial stability

RECOMMENDED EPISODES FOR YOU 

If you liked this episode, you'll love these ones:

• My Money Planning Process to Achieve Your Goals
• How to Get the Right CPA & Why It Matters
• Demystifying Your Credit Score & Does It Matter
• What to Do Today to Pay Less Tax and Keep More Money    

RECOMMENDED VIDEOS FOR YOU 

If you liked this video, you'll love these ones:

• My Money Planning  Process to Achieve Your Goals: https://youtu.be/Ip7kLKXNj2Y 
• How to Get the Right CPA & Why It Matters: https://youtu.be/zj26Wwqe0bk 
• Demystifying Your Credit Score & Does It Matter: https://youtu.be/emgKYPy6Quw 

TAKE THE FINANCIAL FREEDOM QUIZ:

Take this free quiz to see where you are on the path to financial freedom and what your next steps are to move you to a new financial destiny at http://www.YourFinancialFreedomQuiz.com  

OTHER RESOURCES:

7-Day Money Plan Workshop: https://www.TheMoneyPlanWorkshop.com

Affluent Entrepreneurs Private Facebook Group https://www.melabraham.com/group/

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Transcript

1:56

I don't believe that anyone has money issues. What I believe is that they have money symptoms that whatever their money situation. Is, it is a symptom of their decisions, their behaviors, and their habits from the past. Now I get it. That can be confronting, that can be challenging for some people because it rests it back in their lap. But it also should be empowering. It should be empowering to understand that if that's true, truly the case, all we need to do is change the habits, change the behaviors, change the decisions, and we change the symptoms. We change the results. So in this episode, the affluent entrepreneurship. I want to walk you through some money habits that could be keeping you broke. All right, enjoy the episode. 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 are 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 live in Laguna beach. So 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 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, your 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 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 building it. And they know who they owe and how much they owe. 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 spend the money, we buy stuff. We are swiping 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. Yo, 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, and now 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. 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 appropriately. And probably 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 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 precede you asking for that raise. So create value, get paid more. So bottom line is that make investing the priority. 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 will 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 a small thing that happens, but something that maybe 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 more prolonged. If you don't have the liquidity to carry yourself through those downturns, you have a challenge. And so one of the habits that can put you 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, it's just the way life is. Things happen. Fact is that most bankruptcies are a result of medical expenses that can't get paid. 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, your 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 going to keep you broke. Our buying decisions need to be based on us. What do we want. And look, I'm no different to you 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 right now. And what do I 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 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. 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 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 25, 26, 27%. It's going to take you years to. Pay that $1,000 off. And by the time you're done, you'll pay $2,500 on $1,000 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 financial future. And so it's important if you're going to use credit cards, pay them off. But be smart, be diligent, be vigilant. Do it the right way. 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 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 four hundred and one k 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 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 Pacman is eaten. 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 life, your business, to reduce the taxes legally. Think about it this way. If the maximum tax rate is in the 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, are we taking advantage of all the things we can to reduce taxes to the tune of $0.50 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 didn't pay, 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 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 wealth flatline. Okay? It's flat. It's flat. This is where you start your investing. We're putting money in. We're putting money in the 401K. We're putting it in an IR, we're putting in the pension, we're putting 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. Boop. 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 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 flatline 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 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 going to look at the way I'm doing things and I'm going to take control. Now, you may not get it all done in one clean swoop, but one. Step at a time. We stay on that wealth 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. I'm going to keep putting out this content, but stay in the game. We'll get you there, all right? Because your dreams 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 all would strive to live a. Life that outlives you. Cheers.