I’m on a mission to help people get a better handle on their money. Of course, you may be someone who doesn’t make mistakes. However, in the thirty plus years I’ve worked in the financial services industry, I’ve seen lots of things that people do wrong when it comes to their money.
This is a list of the most common money mistakes I’ve come across.
1. Letting someone else take care of your finances
You are making a huge mistake if you let someone else take full responsibility for your finances, even if that someone is your spouse. Just think of it. If your spouse should die or become ill or disabled, you wouldn’t know the first thing in how to proceed.
Likewise, if you don’t monitor how your investment advisor is managing your retirement portfolio, she may be making choices out of line with what you are comfortable with which could undermine not only your financial health, but also your peace of mind.
Yes, your spouse may have more of an interest in money matters, and your advisor no doubt has more knowledge and experience, but that’s no excuse for you to not have any idea about your financial situation. You need to participate in the process and know where your household stands.
2. Being intimidated by personal finance
No one is born knowing how to manage money. Everyone should learn at least the basics. If you are making the choice to make your financial life better, you must learn how to do it, and then implement what you learn.
There are lots of beginner finance books to get you started. By starting with one book, you’ll figure out what you need to learn more about and then can choose your next book after that. Keep reading and learning to make finances less stressful.
Don’t be intimidated by the financial industry. Once you get past the excessive jargon it’s not so difficult to figure out. Say after me, “I don’t understand.”
3. Not planning for the long term
I get it. There are lots of immediate demands on your hard-earned dollars, and the future just seems so far away. However, you need to plan for your long-term financial future.
You are going to want to stop working one day – or you are forced to stop due to circumstances beyond your control – and you need money to be able to retire in comfort. Gone are the days (for most of us) when guaranteed pensions will cover our retirement lifestyle – it’s up to us.
No matter where you stand financially, the earlier you start to save, the more you have the advantage of time – through compounding and reinvested dividends – to make your money grow and allow you to achieve your financial goals.
4. Not negotiating
Negotiating is a skill that you can learn and practise. If you don’t negotiate, you are missing opportunities and losing money.
What should you negotiate? Everything! Negotiate to get the best deal when you’re purchasing a house or car, insurance rates and internet/phone plans, higher pay or more benefits at work, or the velvet Elvis painting from a random street vendor. Negotiating will pay dividends throughout your whole life.
Know what you can afford and know the terms you’re agreeing to before you sign on the dotted line.
5. Focusing on what other people have
Angelina Jolie steps out in the latest must-have shoe.
When you focus on what other people have, you are comparing yourself to them, and you will always feel like you don’t have enough. This sets you up for financial failure.
Instead of trying to keep up with a lifestyle that isn’t yours, focus on yourself and where you want to go.
Another money mistake is surrounding yourself with big spenders if your bank account is crying for you to stop spending. We’re susceptible to peer pressure, whether we realize it or not – and we will become big spenders to keep up. Be aware of the company you keep.
6. Emotional spending
You’ve all heard of “retail therapy.” Spending money to “feel better” in the short term often results in long-term regret.
It’s hard to be objective when it comes to your money, but don’t sacrifice your future financial success by making decisions out of guilt. If you can’t afford it, don’t feel you have to:
- contribute to your grandchildren’s education
- help your child start a new business
- invest with your friend who has just been employed in mutual fund sales
- any other guilt-inducing spending
7. Making financial decisions based on someone else’s criteria
Make choices that are right for you. Before you make a financial decision ask yourself, “What is the wisest decision for me to make?” – not what your friend would choose, rules of thumb, or what financial experts recommend for everyone.
Consider your past experiences, current circumstances and future dreams and then you can build a strong financial future one wise decision at a time.