5 spending habits that prove you earn a lot of money but are never rich

According to a study by the ADB Institute titled “Fintech and Financial Literacy in Vietnam,” Vietnamese people's financial management skills are much lower than those of China, South Korea and other countries in the Southeast Asian region.

Have you ever been in a situation where your wallet is empty before the end of the month? If you are in the high income group but still find yourself in that “financially exhausted” situation, you are most likely one of the HENRYs.

According to the Washington Post, HENRYs is an acronym for High Earners, Not Rich Yet. The term is used to describe people who have high incomes, typically between $250,000 and $500,000, but do not save or invest enough to be considered wealthy. Most of HENRYs' income is spent on consumer spending, education, and housing.

Similarly, the high-income group in Vietnam can still be in a deficit because they have to pay for many unnamed expenses, plus they do not know how to manage their finances or spend wisely. Comparing the level of financial knowledge between age groups of Vietnamese people on a 7-point scale, the group of people aged 30-60 only achieved 4.38 while the group of people under 30 achieved 4.83.

To become rich or at least more financially secure, the Washington Post points out 5 bad spending habits that need to be eliminated right now.

1. Eating out too much

According to the Bureau of Labor Statistics (BLS), in 2021, the typical household spent $3,030/year on eating out.

This is a pretty big number that will make you jump. However, there are still many who argue that cooking at home is actually more expensive than eating out.

However, according to the Washington Post, the average price of a meal out can be just enough or even more than what you would pay for a meal at home.

Of course, cutting out eating out is unnecessary and… impossible. Because this is still a way for you to maintain social relationships and some people even see this as a personal reward for their efforts. However, plan to eat out at restaurants, cafes, eateries, etc.

In fact, you'll probably continue to eat out, but make it a goal this year to significantly reduce the amount you spend eating out. Just think about what you could do with that money — build an emergency fund, pay off debt, or increase your retirement savings.

2. Spending too much on junk food

Don't underestimate the harmful effects of junk food, especially when it directly affects your health and your wallet. Accordingly, choosing an unhealthy diet has increased the rate of obesity.

Adults are at increased risk for serious health problems such as heart disease, stroke, and Type 2 diabetes. And the consequences: poor health and money in your wallet that's gone because of medical expenses. So improve your diet by cutting back on junk food.

3. Not building an emergency fund

The secret to financial management is very simple. You need to follow the steps including measuring your monthly spending (expenses for essential needs and social needs): building an emergency fund; building a savings fund.

The rule is, don't spend more than 10% of what you earn and always make sure your emergency fund is at the minimum level (The level at which you feel safe even if something unexpected happens).

4. Unconscious spending

According to the Washington Post, 40% of a person's spending decisions are based on habit.

“They pass by a supermarket shelf and grab a chocolate bar. When they get their paycheck, they leisurely go shopping and order. These small actions or small purchases can have a negative impact on your wallet if they become a habit and are repeated every month,” the Washington Post wrote.

The solution is to always know how much you can afford to spend in a month. Do you have an emergency fund and savings? And how will those “on the go” purchases affect your financial health if they keep happening?

5. Buying things beyond your means

You’ve probably heard the saying that you should spend on experiences instead of things. That’s true. There are many studies that prove that spending on experiences will bring more happiness and satisfaction than spending on utilities or assets such as houses, cars, clothes, etc.

However, from a financial health perspective, spending on experiences or material things will make you “struggle” if you do not use them wisely. Whether you invest in a trip or a piece of jewelry, always ask yourself if you can afford it without leaving you broke at the end of the month./.

According to Vietnam+