Spend less, save more. This advice is doled out whenever anyone mentions they’d like to start investing in real estate but have no money. This is a pretty popular question in the forums. But have you ever stopped to think about WHY you have no money? Are you 18, still in school, and have no job? Pretty easy to figure out why your bank account is empty. (But keep reading anyway so you know what money habits to avoid once your bank account has something in it.) If you’re a little older, with a job and a life and you still have no money, you might have toxic money habits — ways you earn and spend your money that have a dramatically negative effect on your financial future. You may not even realize your habits are toxic or that you’re setting yourself up for financial disaster later in life. Habits are hard to break, but the first step to change is to realize there’s a problem. Do you recognize yourself in any of these toxic money habits? 7 Toxic Money Habits That Harm Your Financial Future Retail Therapy Kevin McEnerney from McEnerney Tax Advisory Group hits the nail squarely on the head with this thought: “Emotional spending is toxic for your financial future. You might also call this ‘retail therapy.’ It’s important to first be aware of what’s happening, then set ground rules for yourself. Buy items only from a wish list you’ve made at a time free from distractions, anxiety or sadness.” Spending Without a Plan “Spending all your income can really hurt your ability to retire early or on time. Make sure you create a budget,” recommends McEnerney. Actually, EVERYONE recommends having a budget. Dave Ramsey calls it giving every dollar a name. If you don’t tell your money where it’s going and what it’s going to do for you, it will find its own thing to do, and somehow it never finds its way into your retirement account. When asked about toxic money habits, Tammy Johnston from The Financial Guides said, “Not setting up and using a REAL BUDGET. Most people have no idea what it actually costs them to run their lives for a year and end up getting surprised by expenses that they knew were coming but neglected to plan for.” A budget doesn’t only consist of expenses that pop up during the month, like groceries or utilities, but also expenses that are paid annually, like car or home insurance. Take the yearly bill, divide by 12, and account for that once-a-year expense every month so there’s money available to pay it when it’s due. Ostrich Syndrome There is a popular myth that ostriches bury their head in the sand to avoid predators — that they are so stupid they think if they can’t see the predator, the predator can’t see them. This actually is completely false, but popular myths are rarely based in fact, and “bury your head in the sand” is a common term meaning if you ignore your problems, they will go away. But over in The Real World, that doesn’t happen. Another toxic money habit is to ignore issues you don’t want to deal with. Johnston adds that, “Avoiding talking about money with your significant other causes all sorts of problems and is the number one reason why the biggest part of my job is marriage counseling. Some couples actively avoid the subject, others just don’t make the time for it. This keeps you from working as a team to move forward and can get you into a lot of financial trouble.” Along the same lines Johnston continues: “Not looking over their bills, credit card statements, and bank statements. It is not uncommon for me to find at least $200 a month that the average family is bleeding, but they don’t even know it because they never examine their bills. Charges they thought were stopped, unnecessary fees, and my personal favorite ‘creditor insurance’ that is as valuable as used toilet paper.” Along these same lines, Claudia Pennington from Two Cup House adds, “I truly think the most toxic money habit is not knowing what one’s most toxic money habit is. Before 2015, we had no idea that we spent thousands of dollars on dining out, and it was crushing our ability to pay off debt and save for retirement. If we had not identified this, our most toxic money habit, we would have continued living paycheck to paycheck and never retired.” Paying Yourself Last “A toxic money habit is not paying yourself first. Rather than paying yourself first to ensure you have money to save and invest for your future, you may choose to pay yourself last. You may want to pay all your bills, buy any necessities, and have a little fun first. The problem with that is that you may find yourself out of money by the time you are ready to save. When you pay yourself first, you ensure you are saving for your future and you learn to live below your means. Make it into a game. By making it fun instead of a chore, you will enjoy it more and want to continue,” says Dwayne Graves, a Business and Finance Mentor. Not Knowing Opportunity Cost “Every purchase can either be a potential investment or the money saved can be a potential investment. Every penny you put into good investments can be worth dollars in the future. “Yes, there is time and place to spend money just for fun. But those times should be well thought out. In the long run, you will enjoy having money to spend in retirement more so than when young. When you are young, you have a whole world of free activities that are fun, hopefully educational, increase your fitness, etc. “One of the worst money habits is to spend money in the company of losers. Avoid negative, loser situations and people. Develop friendships with people who are working to get ahead in life and put a premium on using their money wisely. You can spend a fortune just hanging out with people who have no concept of a responsible life or any vision for the future. You can spend more money for one drink at a bar than the cost of a good bottle of wine that you can share with your friends in the back yard,” advises Beverly Solomon of Beverly Solomon Design. Want more articles like this? Create an account today to get BiggerPocket's best blog articles delivered to your inbox Sign up for free Business Dictionary defines “opportunity cost” as, “A benefit, profit, or value of something that must be given up to acquire or achieve something else. Since every resource (land, money, time, etc.) can be put to alternative uses, every action, choice, or decision has an associated opportunity cost.” Every dollar you spend could also be spent some other way. Buying a brand new something today not only costs you the $X you paid for it, but the exponential $X that you are giving up by not buying a less expensive something and investing the rest of the money to potentially make even more money. Not Having an Emergency Fund “People who do not have an emergency fund are at the greatest risk of harming their financial future. When you do not have that extra cash sitting there and an emergency happens, you will be forced to turn to debt every time. Mounting debt reduces your retirement savings and puts pressure on you financially. Financial pressure causes people to make more bad decisions and continues this toxic cycle of having no savings and turning to debt every time a problem arises,” says Paul Moyer of Saving Freak. A few years ago, the National Foundation for Credit Counseling released the results of a survey they had conducted about emergency funds. Their findings showed that only 36% of Americans have enough money in an emergency fund to cover a $1,000 unexpected expense. Turn those numbers around, and you have 64% of Americans NOT being able to easily cover a $1,000 expense. What’s your insurance deductible if you were to get into a car accident that was your fault? How about your home owner’s policy deductible if something were to happen to/at your home? I had to have my appendix out when I was younger. That’s an emergency surgery every single time — no price shopping or planning ahead for that one. A total of $14,000 is what it cost almost two decades ago. Losing Sight of the End Goal I was listening to Episode 008 of the How Do I Money? Podcast last week on the way into work. Derek Olsen said, “Sacrifice for the things you want, or the things you want will become the sacrifice.” I really can’t add anything to that. Conclusion: Have a Plan Don’t let life drag you along. Make a plan — a realistic plan — for how you want to live your life, figure out how to accomplish your goals, and then MAKE IT HAPPEN. Have you successfully quit a toxic money habit? What was the habit, and how did you accomplish that? Please share your advice, stories, and questions with a comment.