Since 1997 I have been helping people with their money. Thousands of conversations later, with people from all walks of life, I think I’ve seen every possible mistake made.
Don’t get me wrong. We all make mistakes. But as the old saying goes, “Only a fool keeps making the same one”.
Humans by nature are not perfect, and sometimes we are almost wrong as much as we are right. But being incorrect builds character…you learn from mistakes and move forward.
I’ve decided to share some of the most common financial mistakes I have seen. Perhaps you are guilty of one? (Caveat: although mistakes are made, it doesn’t mean you are doomed. People who made these miscues have bounced back nicely and become very successful with their monetary goals):
Burdened with too much debt. Americans continue to reach new highs in terms of “debt”, and collectively have over $13 trillion of mortgages, loans, and other debt. Here’s the average held per age group:
One of the most crippling types I see is student debt. Sometimes teens are pressured into a higher education even though the school/major/career path wasn’t a great fit. As you get older, perhaps you bought more house than need (yet you can “afford” it), or bought a little more car than you needed. And we all know that credit card companies send out so many marketing pieces for a reason.
Tip: As it pertains to the examples above…Negotiate your student loan debt, or find alternative ways to get it paid down quicker. Downsize your living quarters or rent. Don’t buy cars new, buy them used…and own them for more than 5 years.
Not living within their means. For a good percentage of Americans, saving is not a priority. No budget exists. Spending tends to get out of hand. Next thing you know, you are in your 50s with limited savings. For some people, it’s not about what they DO have…but it’s about what they DON’T have. One of my favorite illustrations of this is here:
If you feel like you can’t get enough toys or vacations (or want a bigger carrot), then work extra hours and cut out excess expenses.
Tip: If this sounds like you, don’t panic. Take a deep breath and come up with a plan of action that reverses the course. Understand that you do NOT need to keep up with the Jones’. The faster you realize it, the better off you will be.
Try to manage finances themselves. This is common, but be aware of the pitfalls. No formal education nor time to learn. Got shady “advice” from a marketing newsletter or website. Emotions might get in the way. Maybe you were told you didn’t have enough money to hire an advisor.
How about this: Ever buy a stock that a friend told you about that never panned out? I did – a couple of times. How many times have I seen that work out for people? Pretty close to ZERO.
Tip: Talk to a professional advisor. At least someone who has credentials, experience, and is trustworthy. I wrote a brief e-book on how to find someone. Also helpful is getting some perspective on the bigger overall picture. Ideally, you have a long-term mindset with some longer-term objectives.
Do not have a (written) plan. Having a plan to follow can help increase your chances of sticking to it. Most people don’t necessarily need 100 pages of charts and graphs – a plan can be as simple as some numbers on a spreadsheet, or a one-page written document. I always tell people that failing to plan is planning to fail.
Tip: Make a plan. Or pay to have one created for you. Your chances of failing are substantially higher if you just try to “wing it”. Studies prove it.
These common mistakes may be hard to recover from. But if we can put our egos aside, a dose of humility could go a long way. We could learn and move forward.
As Henry Ford once said, “the only real mistake is the one from which we learn nothing.”
I hope you’ve enjoyed this piece and it inspires you to take action! I am filled with ideas on how to navigate these issues, feel free to inquire.