There are two different types of attitudinal factors that play a negative rules in people’s lives, people who are easily tempted, and those who are short-term thinkers.
Both groups are more likely to get into financial difficulties to some extent. People who are defined as easily tempted are those who often feel tempted, for instance, to regularly buy things they do not need and find it hard to resist to purchase.
On the other hand, short-term thinkers are those who spent for the present and don’t plan for the future finance.
Such attitudes are often deeply rooted in a person’s character, and hence, harder to change, particularly in the short term. Fortunately, they can be changed in the long term. This is an area in which efforts to prevent people from getting into financial difficulties may prove successful, particularly by financial education.
To understand the impact of negative financial attitudes, socio-economic circumstances, such as income level and educational qualifications, must be considered. Indeed, it is often those who do not plan for future financially are at the greatest risk of encountering adverse financial events, as having little to no financial advantages makes them vulnerable to the consequences of economic downturns.
For example, in Great Britain, between 2009 and 2011, house foreclosures mostly occurred among the people who are living in the areas with the lowest rates of employment, below average income levels, and have negative financial attitudes.
Similarly, in the United States, people of low socio-economic status also experienced the most frequent house foreclosures. These facts highlight the importance of changing negative financial attitudes for those in this category.
Listed below are some financial behaviors that not only constrain most individuals wishing to increase their wealth, but also keep them in poverty. Individuals seeking financial freedom must abandon these negative financial attitudes immediately, or even avoid them in the first place in order to put them at a financial advantage.
Long-term employees
Although being an employee to earn a sustainable income is an important step to achieve financial freedom, throughout history, we have learned that most wealthy people have one thing in common, which is that none of them were employed full-time forever, but tended to rather be investors or entrepreneurs.
Of course, for those who want to start accumulating wealth from scratch, we do not deny that staying a full-time employee can be a first step toward gaining a sustainable income to pay our daily expenses. But most importantly, the income must be utilised for saving and investment.
Individuals who want to accumulate wealth must be aware that staying with a monthly salary for a long time may prevent them from developing or seeking another income.
Some reasons why those wealthy people are not full-time employees are that they prefer to spend most of their time on their businesses or investments, in which they are continuously seeking new opportunities, analyzing or structuring their investments.
And most importantly, successful entrepreneurs do not take their financial situation for granted, they are always on the lookout for unfavorable changes or opportunities, which thus causes them to dedicate time and effort to take care of their investments.
Self-employed individuals have to take care of their own financial situation as no one else will do it for them. And finally, being an entrepreneur means taking more responsibilities and risks. Get out of their comfort zone and create additional income sources.
Individuals who are employees tend to be used to receiving a monthly salary for their work. Unfortunately, that salary usually only allows for living in relative comfort, taking vacations, and paying bills.
Therefore, almost no one became wealthy while on an employee’s salary. To achieve financial freedom, we must turn our monthly income into an investment or building our own business.
In many cases, some may spend years of their lives waiting for a monthly salary to increase, even when working overtime and giving their best, but their bosses only increase salaries to prevent employees from moving to another company, not because they deserve it.
If you want to achieve financial freedom, then you must use your position as an employee to generate a sustainable income in order to build your own business or investment.
Bank account saving
A savings account is important to keep or put aside an emergency capital, to be used in unforeseeable situation. And the liquidity in the saving account can be kept for a short term, to build a new business, invest in stock, or buy a house, for instance.
Unfortunately, savings account have lower interest rates as compared to interests received from investment. Keeping capital in a savings account must not be used as a long-term, as a retirement plan, or as a way to achieve financial freedom.
In 2021, the average interest rate for savings accounts in the European Union is between 0.21 and 0.60 percent for households and corporations, respectively. And the interest rate on savings account are similarly low in most developed countries.
If the inflation rate in most developed countries has reached four percent in the same year, then the value of the currency will decrease, when individuals keep capital in their savings accounts for long. Therefore, most of people would agree that generating a low return on financial income is a key disadvantage of a savings account.
Therefore, keeping your capital in a savings account for the long-term can indeed result in a loss in value if the interest rate does not keep up with the rate of inflation.
For example, if, in January 2020, an individual deposited 1000 USD in a savings account at a bank that generated one percent annual interest, after one year, he would have earned a profit of 10 USD. However, if, in January 2020, another person had bought, for example, three shares of Netflix for a value of 320 USD, after a year, he would have earned an amount of 580 USD.
The previous example is not meant to convince you that you must invest all your financial saving in stocks. Of course, there is a risk of losing your savings in business or stock investment if the value of the stock declined.
Investment in stock requires a careful analysis and knowledge about the market. What the example means is that, for the long term, there are better ways to use your saved income than leaving it in a savings account.
It has been proven that adding monthly savings to a bank account will not create a wealth. However, as mentioned earlier, keeping capital in a bank account should only be for the purpose of using those savings to create additional forms of income, creating a business, or investing in stocks wisely.
Other Negative Financial Attitudes
Listed below are some negative financial behaviors that individuals seeking financial freedom must abandon them immediately or even avoid them: Compounding wealth easily, Lending casually, Gambling, Financial illiteracy, Lack of financial goal, Late or no investment, Single source of income.