We all know people who seem to have cracked the code to financial success. But for every story of success, countless others struggle to break free from financial stress.
So what’s the difference?
Well, often, it’s not about how much they make — research suggests that 1 in 5 Americans with a household income of more than $150k a year are living paycheck to paycheck.
Keep in mind, this is almost double the median household income.
No, it often comes down to habits.
Some common behaviors may be quietly sabotaging financial growth and keeping people from reaching their full potential.
Today, we’re diving into six of these habits, why they’re problematic, and how to start breaking free.
Are any of these standing between you and your financial success? Let’s find out.
1) Failing to set specific goals
What are your financial goals?
No, really—take a moment to think about them.
Many of us say something vague, like wanting to “save more” or “be financially secure.”
But without specifics, these goals can feel out of reach, like chasing a moving target.
Those who achieve financial success go deeper, outlining clear, measurable objectives.
Research backs this up: as noted by experts, “Over 1,000 studies have consistently shown that setting high and specific goals is linked to increased task performance, persistence, and motivation compared to vague or easy goals.”
Setting specific financial goals—whether it’s saving a set amount for retirement, paying off a certain amount of debt, or hitting a milestone in investments—provides a roadmap and keeps you focused.
Instead of hoping to save “some” money, you know exactly what you’re working toward and why it matters.
And that clarity makes it much easier to stay on track and follow through.
2) Trying to keep up with the Joneses
Financial expert Dave Ramsey once said that we often “buy things we don’t need with money we don’t have to impress people we don’t like.”
And while we may not like to admit it, he has a point—social comparison is so ingrained in us that we often do it without even realizing it.
This habit of measuring our success or happiness against others can lead to a cycle of overspending, debt, and financial instability.
When we buy the latest car, upgrade our homes, or splurge on luxury items simply because we see others doing it, we’re not making decisions based on our own financial goals.
Instead, we’re reacting to external pressures that only drain our resources and delay our financial progress.
By setting realistic and meaningful goals that are aligned with our true priorities, we can break free from the “Joneses” trap and start building a secure financial future that actually works for us.
3) Succumbing to lifestyle inflation
When you get a raise or a bonus, it’s natural to want to reward yourself by upgrading your lifestyle.
Maybe it’s a new car, a bigger house, or more luxurious vacations.
While there’s nothing wrong with enjoying your hard-earned money, the problem arises when your expenses increase in tandem with your income.
The issue with lifestyle inflation is that it keeps you stuck in a cycle of living paycheck to paycheck, regardless of how much you’re earning.
It prevents you from saving and investing for your future.
By keeping your expenses constant even as your income increases, you can save and invest more, and achieve financial success in the long run.
4) Taking out high-interest loans
I knew this one had to be part of the list. People spend a staggering amount on interest repayments for high-interest loans—but even I was shocked when I looked up the stats.
According to Experian, “Since 2020, the average car loan payment has grown by more than $100 to $644, and average monthly credit card payments due have increased by $50 to $202.”
These aren’t just numbers; they’re the hard costs of debt that can seriously limit financial growth.
Month after month, a significant portion of income goes toward servicing loans instead of building savings or investments.
High-interest debt can feel like an endless cycle, where paying down the principal takes years and accumulating interest costs more than the original loan.
Finance experts recommend tackling high-interest debt as quickly as possible.
Taking control of high-interest debt is key to gaining financial freedom and creating room in your budget for future growth.
5) Neglecting to plan for emergencies
Life is unpredictable, and financial emergencies can arise at any time.
This could be an unexpected medical bill, a job loss, or a major repair at home.
Many people tend to overlook the importance of having an emergency fund, believing they can deal with unexpected expenses as they come.
But this approach can lead to debt and financial stress.
Having an emergency fund that can cover three to six months’ worth of living expenses gives you a safety net and ensures that unexpected costs don’t derail your financial goals.
Building an emergency fund might mean cutting back on some luxuries or finding additional sources of income, but the peace of mind it provides is worth it.
6) Overlooking the importance of financial education
Legendary investor Warren Buffet once said, “Risk comes from not knowing what you are doing.”
This couldn’t be more true when it comes to managing personal finances.
Without a solid foundation in financial literacy—understanding basic concepts like budgeting, saving, investing, and managing debt—it’s easy to make costly mistakes that can set you back years.
Unfortunately, many people don’t prioritize financial education, either because they feel intimidated by the topic or simply assume they’ll “learn as they go.”
But this lack of knowledge can lead to high-interest debt, poor investment choices, and missed opportunities for growth.
Even small missteps, like not understanding the effects of compound interest or the importance of diversifying investments, can have lasting consequences.
By investing in your own financial knowledge, you gain the confidence and insight to make informed decisions that protect and grow your wealth—making financial success far more attainable in the long run.
Final thoughts
Financial success isn’t just about how much you make—it’s about the habits and choices that shape your financial journey every day.
From setting clear goals to avoiding the pitfalls of lifestyle inflation and debt, small adjustments to these habits can make a powerful impact over time.
Breaking free from patterns that drain your resources and replacing them with strategies that build financial health takes effort and discipline, but the rewards are more than worth it.
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