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Many Americans are in pretty bad shape financially. In fact, the statistics can be pretty shocking.

“Nearly half of all working-age families have zero retirement account savings,” and the median family has only $5,000 saved for retirement (source).

57% of Americans have less than $1,000 in their savings accounts (source).

The average household owes nearly $7,000 in credit card debt (source).

Despite the fact that most Americans are not on the right path financially, many are still following the crowd and making decisions based on what other people are doing.

If you want something better, you need to do something different.

Rather than simply following what you see other people doing, you need to make decisions and take the actions that will get you to a better place financially.

Here are 7 ways that you should not be following the crowd if you want a better financial future.

1. Spending Without Purpose

Many people have no real plan or purpose for how they spend their money. Buying decisions are often made based on emotions, and emotions can be easily swayed or influenced. Emotional buying also tends to involve quick decisions.

You can see the evidence of this all around us in terms of the marketing and advertising that we’re exposed to on a daily basis. Advertisements often appeal to emotions and desires, because that type of advertising works. Companies want to convince you that you need their product or service and that you deserve it.

Bad spending habits lead to spending without purpose. Effective money management doesn’t require you to deprive yourself of nice things, but it does require you to spend your money with purpose.

What you should do instead: We all have different priorities, and purposeful spending will allow you to have money for the things that matter the most to you. Spending with purpose means that you know your priorities and that you avoid unnecessary spending on things that really aren’t important to you, leaving you with money to use in ways that matter more.

Take the time to identify your own priorities, and also think about the things that really don’t matter that much to you. Next, create a budget that minimizes expenses in the unimportant areas, and allows for enough money on the things that do matter.

2. Saving Whatever is Left

When it comes to saving money, the most common approach is to save whatever is left over after all of the other expenses. The problem with this approach is that more often than not, nothing will be left to save.

Studies show that 40% of adults in the U.S. don’t have enough savings on hand to cover an unexpected bill of $400 (source). That’s a result of putting savings at the end of the list or priorities.

Something always seems to come up that stands in your way of saving. If you’re putting everything else in front of savings, you’re unlikely to make much progress.

What you should do instead: In order to grow your savings, you need to make it a priority. Treat your savings as a bill or expenses. Give yourself a specific dollar amount that you are going to save each month, and make it one of your budget categories, just like anything else that needs to be paid on a monthly basis.

If you’re having trouble creating room in your budget for saving or investing, you’ll need to cut back in other areas in order to make it possible. This article has plenty of tips that can help you to reduce your monthly bills.

One way to be sure that you are saving is to automate it. If you have a 401(k) plan available through your employer, you can set up automatic contributions that will be taken out of your paycheck each pay period. The nice thing is, that money will be taken out before you’re paid, so you won’t even see the money or have the chance to spend it on something else. Your 401(k) contributions can also help to reduce your taxable income.

Aside from a 401(k), you can also set up automatic contributions with other investments. You can even set up automatic transfers from your checking account to your savings account.

3. Buying Based on Monthly Payments

Just about anything can be financed these days. It’s easy to get tempted by low monthly payments, but don’t lose sight of the bigger picture.

Shortly after graduating college, I worked in the mortgage industry and later for a company that leased commercial equipment. Both companies sold customers on monthly payments and tried to avoid talking about interest rates or the total amount that would be paid over the life of the loan.

A similar approach is used for selling other things like furniture, appliances, and even smartphones.

If you buy based on monthly payments, as most people do, you’ll wind up with a collection of monthly bills that end up costing you way too much over a period of time.

Monthly payments are used in marketing because it works. It’s an effective way to convince people that something is affordable.

What you should do instead: Don’t use monthly payments to justify buying something that you don’t need or can’t really afford. Avoid leasing or going into debt for things that should be purchased with cash.

Of course, there are some purchases (like a house and maybe a car) that are out of reach for most people without debt or monthly payments. This point is more about things like electronics and gadgets that aren’t truly essential.

4. Buying Too Much House

The typical approach to buying a house involves getting a mortgage pre-approval from a bank for a certain dollar amount, and then letting that amount dictate the budget for the home purchase.

Many people wind up buying a bigger or more expensive house than they need or can afford.

Research done a few years ago by Harvard University found that nearly 40 million Americans live in housing that they cannot afford (source). This includes both renters and homeowners and it’s based on the threshold of 30% of income as the top level of what should be spent on housing.

Spending too much on housing leads to less money for other important things, like paying off debt, saving, and investing.

If you hope to be able to eventually live mortgage-free, first you’ll need to choose a house that is affordable and one that does not cripple your overall finances.

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What you should do instead: The general rule of thumb is that you should spend no more than 28% of your gross income on housing (see a full list of recommended budget percentages). If you’re a homeowner this would include your mortgage payment, property taxes, homeowner’s insurance, and PMI (if applicable). For renters, it includes rent plus renter’s insurance.

When you’re creating a budget, be sure that your housing expenses are in line with this rule of thumb. If they are significantly higher, other areas of your budget will suffer and you’re more likely to add debt.

If you’re currently spending too much on housing, your options include refinancing (may be possible in some situations), negotiating a decrease in rent (usually not very likely), moving, or increasing your income. Increasing your income could be done by getting a higher paying job, getting a raise at your current job, working overtime, or starting a side hustle.

5. Putting Too Much Emphasis on Social Status

Appearances can be deceiving. If you see someone driving an expensive car or living in a fancy home, you may assume they are rich. That’s not always the case.

Not only do we use social status and appearances to make judgments about others, but we often let the same factors influence our own financial decisions, and the result is excessive spending.

If you seek social status or acceptance from others based on the things that you own, you’ll wind up spending more money to portray the image that you want.

Cars, clothes, jewelry, houses, and all kinds of other things can be status symbols, and there are plenty of ways that this causes problems.

The image below is a perfect illustration of how appearances can be deceiving.

Image used with permission from The Finance Twins.

What you should do instead: Instead of making purchases to improve the way other people view your status, allow your own priorities to dictate how you spend and save your money.

In the illustration above, the wealthy woman on the right has prioritized saving and building net worth over having fancy things that impress others.

It’s been said that if someone looks rich, they probably aren’t.

For most of us, money itself is not the goal. Having money is good because of the options it provides and the things that it makes possible. Spending too much money chasing after higher social status will put you in a worse spot and you’ll be trading the more important things for something that really doesn’t matter as much.

6. Making Minimum Payments

Minimum monthly payments are just that, the minimum of what needs to be paid.

Not all debts are equal, and when you’re dealing with high-interest debt like credit cards, making only the minimum payment is a bad habit. By paying only the minimum, you’ll be stretching the debt out over a very long period of time, and you’ll wind up paying a huge amount in interest.

What you should do instead: If you have credit card debt or other high-interest debt, you should be paying more than the minimum payments. Both the debt snowball approach (attacking the debt with the smallest balance first) and the debt avalanche approach (attacking debt with the highest interest rate first) can help you to eliminate debt quickly.

Paying off debt takes discipline and commitment. You may need to adjust your budget to free up some money that can be used to pay down the debt.

7. Lacking a Plan

A 2018 study by Charles Schwab found that only 25% of Americans have a written plan (source). The study also found that having a written plan can lead to better daily money management.

Money and finances are dreaded topics for many people, and the common approach is to ignore it and hope it doesn’t cause problems.

A study by the Stanford Center on Longevity found that “One-third of baby boomers had no money saved in retirement plans in 2014, when they were age 58, on average, leaving them with little time to start saving for retirement.”

What you should do instead: Take the time to develop a financial plan that involves goals and timelines. You can either create a plan on your own, or get the help of a professional.

Without some sort of plan, you’re unlikely to make significant financial progress and you will lack direction

While there are plenty of common mistakes that can be made by following the crowd, the good news is, these mistakes can all be overcome if you’re intent on improving your own financial situation. Take a look at your own habits and see if you’re falling into any of these traps, and if so, take the necessary steps to fix it.