Feeling behind the eight ball with your money?
Scratching your head wondering what you’re doing wrong?
You might be suffering from the impacts of making these financial mistakes. Here’s what to avoid, and how to fix each one.
BTW, these are relevant at any age but they can have a big impact (in a not so good way) the later in life you are.
Mistake 1: Going ‘all in’ on debt and delaying your retirement savings
It’s better to be strategic about how your debts are organized than to obsessively focus on debt reduction before starting to invest. Once you optimize the debt (often through consolidation of high interest balances like credit cards), you can achieve debt freedom faster. But you also need to balance investing for your future. (You don’t want to go crazy paying off debt for years and then have nothing to show for it afterward, right?). The biggest benefit your money receives in the compounding process is more time to grow. So, the earlier you start to save, the greater your opportunity for growth. Saving at the same time that you’re paying down debt will also help shift your mindset to a wealth mindset.
Whatever you do on the debt front, don’t carry a credit card balance (average interest rate is over 19 per cent — horror!). Clear the balances each month and if they are repeatedly out of control, start working with a money coach or money psychologist who can keep you accountable to your debt reduction goals.
Wealth builders actually do use debt — but only the good kind!
Mistake 2: You have money left over in your budget
Having nothing left over, and ALL your money assigned to perform specific and strategic “tasks” in a month is THE MOST efficient way to ensure you build financial security. So, your budgeting goal isn’t to create excess money, it’s to put that money to work for you through saving, investing, debt reduction and living. In my experience, if you remarkably have money left over in your bank account, it usually means you’re not saving enough. So, get on it!
Mistake 3: Setting your budget and forgetting about it or not having a budget at all
Listen, you need a budget in order to build financial security. There are no ways around this… even if you were to win the lottery.
Budgeting is not meant to be a one-and-done event. It’s an ongoing process. In fact, the entire financial planning process is ongoing. Sit down and see your month ahead. Then whip out your budget template and start setting out your spending intentions for the upcoming month — essential and non-essential spending, plus what you want to save. Then, carefully detail your sources of income (even if it’s projected). From there, put every dollar to work, being strategic with saving and debt reduction.
Research shows that you’ll start to see efficiencies in your budget within 90 days if you take action.
Mistake 4: Assuming financial security will ‘just happen’ for you on your own
Financial success stories you read about and scroll through on Instagram don’t “just happen.” You need a profitable financial plan in place to make it happen. Each step you take with your money should be valuable AND it should help you build net worth by increasing assets and reducing liabilities. With a financial plan in place, you’ll learn how to achieve better returns on your investments and you’ll find peace of mind knowing that you FINALLY have a plan to fund your retirement.
Also, having a financial plan will force you to make goals, and people with written financial goals simply have more money!
Mistake 5: Overspending
Yes, everything costs more right now. But rather than throwing in the towel on your spending, you’ll want to figure out how to reduce your costs where and how you can so that you don’t spend more than you earn. This might mean only buying food that’s in season or on sale, planning your routes better so you don’t waste gas, skipping this week’s takeout, canceling streaming services. It’s time to be more mindful of your spending habits.
And, here’s a little secret about wealthy people; they play the “keep what I’ve worked so hard to earn” game — try it!
Mistake 6: Not having an emergency fund
Fewer emergencies happen to people with emergency funds. It takes time to build this up and the best way to do it is by automatically transferring three to five per cent of your take-home pay into a high interest savings account on payday. When you have about three to six months worth of essential expenses tucked away, you can stop these contributions. It takes time to build this up, so stick with it.
If you have a sinking feeling in your belly right now, you need to know it’s not your fault for not knowing this! Unless you had a strong money mentor early in your life, NOBODY tells you this stuff — how much to put toward savings, debt, investments, and even toward your groceries, or fun money, and how to straighten this all up if you’ve made money mistakes in the past.
Just forgive yourself. Learn from your mistakes. Move on and make a new and better money story for your future.
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