AS we near the end of 2024 and look towards a new year, it’s not too late for a money habit check-up. Now is the opportune time to rid yourselves of bad money habits that have kept you stuck.

Our financial habits affect all aspects of our lives. Are your financial habits causing anxiety or fear or are your money habits resulting in optimism and enthusiasm about the future? I hope today’s article will help you approach 2025 with the confidence that positive money habits are the game changer for financial success next year and beyond.

Last week I conducted a financial consultation with a 24-year-old client, who jointly owns an investment account with his father. However, he needed advice on how to grow his money for the future and decided to review his financial plan. This client recognised that it was necessary to have good money habits. His father was instrumental in introducing him to long-term investments six years ago. This young client is now more confident about diversifying his investments. He is working full time and has a side hustle that provides passive income.

But there was one bad money habit that had him in a financial rut. He had poor spending habits. I have often said that financial institutions will dangle credit cards to young susceptible working adults and also the older generations who are seeking credit card rewards. This particular client had the bad habit of making the minimum monthly payments and would sometimes make a lump sum deposit to compensate for the monthly payments or any missed payments. He, however, confessed that despite his effort to reduce the outstanding balance his credit card balance has not improved sufficiently. Upon assessing his credit card statement, the interest rate was 51 per cent per annum and that was applied to his outstanding balance. The cash-back reward failed to compensate for the high interest rate. Based on my recommendation, the client was determined to change his bad spending habits. Without hesitation, he transferred funds from his bank account and cleared the total outstanding balance.

He clearly understood how to avoid high credit card interest payments in the future by ensuring that he has sufficient cash in his bank account to cover any expenses made with the credit card and that the card is paid in full by the due date. Another major step that the client made was to embark on owning shares in the same credit card company via an investment account at BPM Financial Ltd. This client already did his research on the profitability of the credit card card company and was impressed with last year’s returns on investment. He has a long-term mindset and learned a lot from working within the family business.

Are parents discussing money and money habits with their children? There is no known data in Jamaica about the number of parents who are talking to their children about money. At the same time, the US-based Fidelity Investments “State of Wealth Mobility Study” revealed that 56 per cent of Americans said that their parents never discussed money with them. In Jamaica, there is a savings culture and many children opened savings accounts while in school. Research by the University of Cambridge reported that money habits are developed in childhood from as early as age seven. Another study by North Carolina State University found that children are paying attention to matters relating to money within the household and parents should ensure that children don’t draw the wrong conclusion about finance. The study showed that most parents didn’t discuss investments or debts with their children. Additionally, parents were more likely to talk to their sons about investments and debts than their daughters. The habit of discussing financial matters with all members of the household can go a long way in changing the financial fortunes of families for the future.

In the book, Rich Habits Poor Habits, authors Michael Yardney and Tom Corley discuss the bad habits that make some people poor and the good habits that make successful people wealthy. A 2006 study by Duke University found that 40 per cent of our daily behaviour is attributed to our habits. Many self-made millionaires learned their money habits from their parents or mentors. The two main money habits are saving and spending. One smart money habit is to spend less than we earn and to save and invest the difference. The compounding returns are a proven path to creating wealth in the long term. Avoid living up to the Joneses’. Control spending; make a budget and stick to it. Ideally, you should earmark how much to save and invest from your income and pay yourself first, like a bill, and spend from the balance. Have specific financial goals and devise a financial plan. Do not make emotional decisions and also avoid impulsive buying.

Finally, it’s necessary to understand the subtle differences between being rich and being wealthy. The rich see money as allowing them to live the lifestyle that they want and tend to have a short-term mindset. Hence a person by virtue of income can be classified as rich yet live from one pay cheque to the next. The wealthy, on the other hand, have a long-term focus and are not centred on all that money can currently buy, but on how they can use money to increase wealth. The rich spend differently from the wealthy. The rich are more vulnerable to the lure of leisure and luxury — expensive clothes, vacations, cars, etc. and are likely to have difficulty tracking their spending. Winning the lottery can make one rich, but the spending habits will determine how long the riches last. The income streams of the wealthy are more extensive than the rich and they are more prone to owning long-term assets, such as stocks, real estate, businesses, and other assets that increase in value with time.

For 2025, will your money habits make you or break you? A professional and experienced financial advisor can assist in making wise money decisions and developing good money habits.

Grace G McLeanis a financial advisor and retirement specialist at BPM Financial Limited. Contact her at gmclean@bpmfinancial or visit the website: www.bpmfinancial.com. She is also a podcaster for Living Above Self. E-mail her at livingaboveself@gmail.com