10 Money Habits Keeping You Poor

If you want to become rich, you either marry somebody wealthy, you win the lottery, or you develop healthy financial habits. While a step-by-step guide on how to marry somebody rich would be cool, this video is about the financial traps that are silently keeping you poor, perhaps without you realizing it, and by escaping them, odds are you will get rich. This is the Swedish Investor, bringing you the best tips and tools for reaching financial freedom. With further ado - Number 1: Paying Yourself Last What do you do when payday hits; when you receive cash to your account, and you feel that sudden relief? Well, a good deal of people starts by paying their interest on their house, in effect financing the paycheck of their bankman. Then perhaps they pay the car dealer for the installment on their Volvo car. Then they go to a restaurant to have dinner and pay the chef and the cute waitress. Then they buy those shoes they’ve been eyeing for a while, increasing the wealth of the shareholders of Nike, or something. By the time the month is over, they look at their bank account balance to see if there’s anything left for themselves, and they are like: What? Saving? Well, I meant to… But ehm … Maybe next month? This is a classic mistake—paying yourself last. Most people treat saving like it’s optional, a nice-to-have if there’s any leftover money. The truth is, there usually isn’t. Instead, flip the script. Pay yourself first. The moment your paycheck arrives, set aside a fixed percentage—let’s say 10%—before you do anything else. Ideally, you automate the transfer, so it goes straight into your savings account without you having to make a decision. Think of it like a bill you owe your future self – and treat it like the most important bill, because in terms of wealth accumulation, it is! This next trap is just mindbogglingly foolish. Yet, millions and millions of people fall prey to it every day: Number 2: Buy Now Pay Later I understand it feels good, receiving a new phone without having to pay for it. But don’t do it, just don’t. Now, I’m not talking about taking on some debt to help finance a home for your family. I’m talking about using credit for buying clothes, electronics, or even worse, something without a resale value, like vacations. What people often seem to forget is that companies like Klarna, Affirm, and Afterpay have these deals – not because they’re being generous, this isn’t charity we’re talking about, but because they’re banking on people’s bad money habits. They make it easy to buy things you can't actually afford, knowing full well that many people will miss a payment or stretch their budget too thin. And that’s when the interest rates kick in – sometimes as high as 30% - plus sneaky fees for late payments. These bloodsucking companies’ whole business models are based on it! So, just ditch “buy now, pay later” and stick to using a debit card or cash. It gives you control, and you 100% avoid paying interest fees. Maybe you already stay clear of the 2 bad habits just mentioned? Good job. But you’re not there yet. Failing at just one of some of the remaining 8 can truly rob you of your future wealth. Let’s continue: Number 3: Living Beyond your Means Let’s say you’re in your 30´s, and that you can now afford a $35,000 car. Should you buy it? Well, do you need it? Because odds are that you probably just want it, and that’s not the same thing. Maybe a $10,000 car would suffice for getting you from point A to point B? The $25,000 difference can instead be invested; and if you’re in your 30´s, those $25,000 will probably be worth half a million by the time you reach your 60´s. And what did you sacrifice? A bit of shallow appearances? The idea is to buy based on your needs, not what your paycheck says you can technically afford

Number 4: [Just] Saving Having a surplus of money each month is really a two-sided equation; of firstly making money, and secondly saving part of that money. I see a lot of hustling and dedication going into the 2nd part of that equation, and that’s all good – but neglecting the first part will make you plateau, as costs can’t be trimmed indefinitely. Whilst on the other hand, there’s no real limit to how much money you can make. To infinity, and beyond! Bringing your lunch to work every day, skipping the fancy coffee, and scouring the internet for the best deals on everything you buy, isn’t at all bad. But if it makes you forget the endless opportunities to increase your income, it’s at best sub-optimal. So, buy your lunch at the nearest restaurant occasionally, and spend the time you’re freeing up to explore ways to increase your income. Famous investors who I look up to like to make analogies about gardens, so I’m also going to give it a try. If you want your garden to flourish, you mustn’t only trim annoying weeds, you must also add seeds, water and sun. Number 5: Resetting Compounding Let’s start by stating that if you follow the advice in this video, you will get rich. The question is how rich. We’re not just doing this for money. We’re doing this for a shitload of money! And by the way, the goal of getting rich isn’t really the money, it’s to achieve the “wealth trinity” presented in MJ DeMarco’s book The Millionaire Fastlane, but we’ll get to that. So, adhering to this, you’ll get rich, but, if you reset the silent powerhouse of compound interest by making large withdrawals, you risk ruining the whole mechanism, and you’ll have to start over. The most common large outlays of money that people experience are probably cars and their home. I don’t think I need to convince you that purchasing an expensive car is detrimental to your wealth. But what about your home? Of course you need someplace to live. But can you postpone purchasing a house for a few more years? Because odds are, investing in the stock market will be a better pay-off than any potential appreciation on your new home. I looked at the longest data-series I’ve come across, which is Robert Shiller’s data on home prices in the US from 1890-2025. If you invested in a home in 1890 and were lucky enough to live 135 years, you’d have a 3. 4% per year return on that investment. Meanwhile, if you did the same thing in the stock market, you’d have a 9. 3% return. It’s hard to grasp what this actually means. A 6% difference, doesn’t sound that much … is it? It is. You’d be 2000 times richer if you’d put the money in the stock market rather than in a house. Now, one could leverage that real estate investment in 1890 by just putting in 10% in down-payment, like a lot of people do today, but the difference would still be 200x in favor of the stock market. Sure, it might be more expensive to rent an equivalent property, rather than owning it, but that’s just a very big difference to make up for. So, try to postpone purchasing that home, or, at the very least, don’t spend like there’s no tomorrow on it. There is no substitute for the learning that comes through debate with other intelligent minds, and if you don’t agree with the housing vs stock market investment choice, I’d love to hear from you in the comment section! By the way, there’s opposing views on this subject from the Buffett and Munger duo: Number 6: Postponing Investing

Think you're too old to start investing? Or maybe you don’t know enough? Or do you have too little money? Screw all that and just get started. The truth is every day you put off investing is a day your future wealth shrinks. The earlier you start, the bigger the payoff, as time is the single most important factor for growing wealth through compounding. The old dogma holds true: “the best time to start was yesterday, the next best time is today”. You don’t need to be an expert or have a lot of money. Set it up automatically so that as your salary reaches your checking account, it is automatically invested in some low-cost index fund. That’s the bare minimum. Get used to the process, and remember that the key is consistency, not perfection. Of course, another thing to remember is that, if you are going to be in stocks, you must be in for the long run. If you are saving up for heart surgery in 6 months, stay away from the financial markets. Number 7: Failing to Measure My guess is you know exactly what you earn. But you probably don’t know how much you’re spending. Of course, you know your rent, or interest rates and amortization on your mortgage, but then what? Take a bucket, where the water in the bucket is your wealth. You go to work, you know, 9-5 every weekday and add some water to it. Yet, it never seems to fill up. You wonder... why? Then a friend of yours comes by and points out that you have holes at the bottom of your bucket. That’s just an analogy of course, and many aren’t lucky enough to have such a friendly friend, but many definitely have holes in their financial bucket without realizing it. A golden rule in life, that can be applied to anything you care about improving, is that “what gets measured gets managed”. I remember some friends in a senior class in school had made a presentation about the financial impact of smoking. The take-home message was that, let’s call him David, who had been smoking half a pack since he was 15, was now broke and sick, while, let’s call him Michael, who hadn’t smoked, was healthy, and, could afford a Ferrari. While you may not be a smoker, measuring your expenses could still reveal your very own Ferrari-generator. And if you think a Ferrari is too shallow, then this is all hypothetical, but I hope you get the point anyways. Number 8: Keeping Up with the Joneses The urge that Munger talks about, the urge to "keep up with the Joneses" is everywhere – whether it’s a friend’s luxury vacation or a neighbor’s new car; you see somebody’s spending, and although you didn’t mind your old car a minute ago, you suddenly feel the pressure to match the neighbor’s new one, even if it means sacrificing your hard-earned savings. Envy is a never-ending cycle, one that you need to combat if you are to ever become wealthy. The good news is that this situation is a win-win. By stopping the habit of comparing yourself to others, you not only protect your savings and wealth but also enhance your happiness. Avoiding comparisons with others and their temporary status symbols showcased on Instagram allows you to concentrate on what truly matters—such as building relationships, prioritizing your health, and engaging in fulfilling activities. Number 9: Tax Inefficiency As Benjamin Franklin put it: “… in this world nothing can be said to be certain, except death and taxes”. Boy, does he deserve to be on the $100 bill… Tax will be your single biggest cost through life, and every dollar you lose to taxes is one less dollar you could have saved, invested, or spent on things that matter to you. Tax strategies for both income and capital differ greatly depending on where you live, so I’m not going to make a deep dive into specifics here. Instead, I recommend that you use something like ChatGPT to get started

– it’s pretty good at matters like taxes. This might be a bit controversial; but don’t spend very much time on taxes. Prioritize increased income over exaggerated tax-avoidance schemes. If you are earning a ton of money, society has probably served you well. Show your appreciation with your wallet. Last, but not the easiest, least: Number 10: Lifestyle Inflation How come you currently make more money than ever and still isn’t where you want to be financially? It’s probably because of lifestyle inflation, where you let your costs go up on par with your salary increases. It’s one of the most dangerous financial traps one can end up in. Why? Because it can keep you poor no matter your income -level. A friend of mine who’s got a well-paid job in investment banking job likes to joke that when the yearly bonuses arrives, all of his coworkers are tied to their screens, scavenging the internet for their next expensive shoes or the next fancy watch. But the trick is to increase your living standards more slowly than your paycheck increases. Because if you let your costs rise on par with your salary increases, you’re still living paycheck to paycheck, just with fancier things. Make sure to keep your savings rate fixed; so that as you go from saving 10% on a $30,000 salary, continue to save 10% also on your future $60,000 salary. This way, you can achieve what MJ DeMarco talks about in The Millionaire Fastlane. True wealth is not keeping up with the Joneses. It’s achieving the “wealth trinity”: family, fitness and freedom. Money, rightly used, buys the freedom to: … watch your kids grow up … pursue your craziest dreams … make a difference in the world … build and strengthen relationships … do what you love These are not complicated things. Yet, they are not necessarily easy to live by. Charlie Munger again: "Take a simple idea and take it seriously. " Well, take these ideas seriously, because if you do, you can not help but becoming rich in the process. If you want to take your wealth-building process one step further, check out my summary of MJ DeMarco’s “The Millionaire Fastlane”. Cheers!