Breaking the Cycle: Overcoming Poor Financial Habits for Generational Wealth

Many of us feel stuck in patterns we do not know how to break. We don't even really know how we got there. Did it begin with us or is there a bigger story here at play? I have definitely wrestled with this idea myself as I am navigating this downstream life that I am living. I have recognized that there are generational habits rooted within my family that need no maintenance but some deep uprooting.

And this is in the area of financial habits. When there is a generational cycle of financial struggles, one must stop and ask why. In order to overcome these poor financial habits we must begin with what are they. The power of intentional change can be the difference between the next generation having to swim upstream or downstream.

Common Poor Financial Habits Passed Through Generations

1. Living Beyond Means

This means that you are living in such a way that your expenses exceed your income. And many view this as normal. According to a MarketWatch survey, over 66% of Americans live paycheck to paycheck. They can barely afford basic essential living expenses like housing, utilities, groceries, and transportation. Common factors that contribute to one living beyond one's means are social pressures (trying to keep up with the Joneses), short-term gratification, improper use of credit cards, lack of financial planning, and economic dishevel. Living beyond your means puts you at risk of not being able to have money for an emergency fund or to invest.

2. Lack of Budgeting

"Where there is no vision, the people perish" Proverbs 29:18

I absolutely love this verse in Proverbs. It gives us the wisdom of the importance of having a vision. And this could be a vision in other areas of life besides finances. But, having a clear and attainable goal in mind when it comes to tracking your income and expenses is so very important. If there is no plan how do you expect to not live over your means if you do not know how much you are spending compared to your income? A budget is a tool to help ensure that your expenses align with your income.

3. Dependence on Debt

"The borrower is slave to the lender" Proverbs 22:7

Using debt to get by will harm you in the long run. There is no true financial freedom for someone whose livelihood is controlled by debt. The largest sources of debt are mortgages, vehicle loans, student loans, and credit cards. The average household debt in the U.S. reached $17.5 trillion in the fourth quarter (October-December) of 2023. According to the Nerdwallet survey, of the 48% of Americans with revolving credit debt, 41% say non-necessities (luxury goods and electronics) contributed to their debt.

4. Scarcity Mindset

This is a deep topic that needs a blog post of its own. Something that I am uncovering and learning myself. But I am learning that having a scarcity mindset and limiting beliefs is holding many of us back from the purposes the Lord has for us. And those purposes could be the opportunity that leads to multiplying what you have to create generational wealth. A scarcity mindset is a belief that there is a limited amount of resources, opportunities, and success available. This mindset leads to people believing that someone else's success is at their loss. A scarcity mindset also leads people to think that what they have is not enough. Rather than viewing what they have as an opportunity to be "fruitful and multiply." I believe the Lord has created us to be people who are generous and caring for the needs of others. The Lord created us to be people who multiply. He is an abundant and gracious God. And he desires to bless his children. But many of us are trapped by generational and cultural cycles, not knowing how to move forward.

5. Financial Secrecy

   
   

In my growing up experience the idea of having conversations about money was not normal. Being raised in a family that does not have open conversations about money can leave children thinking that money is a taboo topic that should not be discussed. Doing this can give the next generation a skewed view of money and can lead to poor financial habits. And we all know that habits are not easy to break.

Steps to Break Poor Financial Cycles

1. Acknowledgment and Awareness

To move forward into a growth mindset in the area of finances we must acknowledge the poor habits that were sown generationally. Becoming aware of these poor habits allows you to recognize the problem and begin the process of finding solutions. You do not have to be a part of the generational cycle of poverty you can begin the journey of creating generational wealth. I encourage you to take time and write down some of the poor habits you have seen within yourself or even passed down generationally.

2. Financial Education

It is very important to take the time to educate yourself on how to steward your finances through budgeting, investing, and wealth-building. We live in the information age where we have access to learn from others who have gone ahead of us. I mean this with a heart of great love stop being lazy and do the work. I need to remind myself all the time of the great blessings that come with many resources to educate not only me but the generations to come.

3. Creating a Budget

Stop what you are doing right now and go make a budget. It will help you out a lot. But when you do make a budget make sure that you are setting realistic goals. There are many who utilize a budget but still end up overspending. It is important that you have realistic expectations and make adjustments when needed.

4. Emergency Fund

   
   

Having an emergency fund is very crucial and can help you in the long run if something were to come up. It is not wise to assume nothing will happen in the future and make the unwise decision of not having money to the side. 42% of Americans do not have an emergency fund at all. This is concerning and something that we all should make changes within our finances to compensate for an unexpected car repair or even medical care.

5. Debt Reduction Strategies

   
   

Don't just stay in debt and allow it to accumulate. It is important that you start paying off debt to allow financial freedom. To start, find a good debt reduction strategy that will motivate you to pay off your debt and not allow it to linger any longer. There are many debt reduction strategies out there you want to make sure that you are choosing a strategy that will actually work.

Here is a debt reduction strategy I recommend and one you can look further into:

• Debt Snowball Method

6. Teaching the Next Generation

   
   

It is so important to not just keep the financial wisdom you are learning to yourself but also make sure that you are teaching the next generation at an early age. Why wait to teach your children and those around you how to be good stewards of their finances? You can help them begin early in knowing how to make good money choices. And their wisdom can be passed down on to the next generation.

Your Financial Legacy Starts Today

My friends today could be the day in which you make changes to start a legacy of being a good steward of what the Lord has given and to multiply it. You do not need to be held captive by generational cycles you can begin the steps of creating generational wealth. Small changes can lead to long-term transformation. Here are some actionable steps to take: recognize and become aware of the poor financial habits, evaluate what is leading you to make poor financial habits, and start implementing the good habits.