I once heard a mentor of mine say that money may not be the most important thing in life, but it’s right up there with oxygen.
Having financial stability gives us a lot more options in life. Adults spend most of their working lives earning money so that they can have the lifestyle they want, however they also make dumb mistakes when it comes to money management.
When someone is struggling financially, it:
- Affects their mindset or attitude.
- Places a lot more pressure on personal relationships.
- Can cause physical problems like stress, anxiety or mental breakdown.
- Limits their ability to take risks in order to improve their financial situation.
- Lowers their self-confidence and motivation.
The more intelligent we are financially, the better our chances of creating the life we want. We’ll also be in a better position to help others who are in need.
One of my mentors says, “Money is a magnifier. It makes you more of who you are already are.” If we are generous, having more money will make us more generous. Likewise, if we are stingy about money, if we come into more money, it will make us even more stingy.
While it’s beneficial to have an abundant mindset, a good starting point is to be aware of common money mistakes people make so that we can be more financially responsible and avoid these mistakes.
10 Common Money Mistakes to Avoid
- Not having a financial plan. As the saying goes, “Failing to plan is planning to fail.” Having a financial plan may include planning for retirement, planning for kids education, or having a plan to be financially independent or debt-free. It’s important that we get advice from those who can demonstrate via results that they know how to help us have an intelligent financial plan.
- Having too much bad debt. Bad debt is regarded as the kind of debt that will not help our financial situation over the long term. Examples include credit card debt, vehicle debt or household goods debt. The more intelligent we are about what is a good debt or a bad debt, the better off we’ll be financially.
- Relying on a single source of income. Having only one source of income, which for most adults, is their job, is a strategy for disaster. With so much down-sizing happening today plus jobs being replaced by new technology, it’s up to us to explore alternative sources of income and not be dependent on a single income source.
- Spending money on non-appreciating assets. If we’re really honest with ourselves, we don’t need most of the material things we have in life. Wasting money on unnecessary things like appliances or white goods, additional vehicles or even upgrading to the latest smart devices do not help us financially. We have to learn to value what we already have and stick to our financial plan.
- Not paying yourself first. The typical cycle for a working adult is: work or provide a service, get paid, cover expenses then make the most of what’s left over. By making one small change, which is to pay ourselves a certain amount every time we earn money before we cover our expenses, and more importantly, not use that money, it will grow over time thanks to the power of compounding.
- Having a standard of living beyond what you can afford or really need. We have to continuously evaluate what we really need to live the life we want. If we have a habit of accumulating more possessions, we have to ask ourselves why and what’s driving that. Sometimes people do things just to try and impress others or to be seen a certain way, which is not intelligent at all.
- Not being willing to have a budget. Sticking to a budget brings up mixed responses from people. While some thrive on having and sticking to a budget, for others, it may bring up a lot of resistance. A budget is helpful if we are struggling financially and need to have a guide to control how we spend our money. Once again, its helpful to get advice from a financial expert.
- Not having appropriate insurance cover. Things happen in life, whether we like them or not. Knowing that we are protected in case of an emergency can save us a lot of stress and heartache. Having income protection, life insurance, business insurance, and health insurance are some common insurances people have, so we have to research what’s relevant to us.
- Not having emergency funds. While having insurance will help, sometimes it will not be enough. Part of our financial plan may be putting funds aside should an emergency arise. Knowing that there is money put aside, in case we ever need it, can give us peace of mind and take away a lot of our financial stress.
- Not being willing to talk about money. Talking about money brings up a lot of things for people such as discomfort, unease or embarrassment on the negative side, and motivation and high ambition on the positive side. In order to better understand something, we have to be willing to learn and talk about what we’re learning so that we can continually improve. The subject of money should not be something we shy away from.
If we become a lot smarter about the subject of money, we will start experiencing a different reality and create a better lifestyle. If we don’t learn about money and we have a desire to improve our reality, we will continue to experience life at the same level as we currently are. It’s time to avoid these dumb money mistakes and become more financially intelligent.
Question: What is another common money mistake people make in life?
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