Here are some of the mistakes we make regarding money and how to avoid them. Here are some of these mistakes:
- Saving with the right hand and spending with the left hand.
- Playing it too safe.
- Living in the moment.
- Throwing good money after bad.
- Following the crowd.
- Letting your ego get in the way.
- Ignoring frugality.
- Not having an emergency fund.
- Believing that your future self will take care of it.
1. Most of us indulge in the “big boy arrival syndrome”. We often indulge in spending cash as soon as we earn it thereby eating more than we can chew. For instance, you have a lot of fun but at the age of forty-five, you realize that life is not a huge party without no assets in the kitty. Start getting used to putting a bit away every month.
2. Once you have your financial house in order and plenty of money in an emergency fund, start investing. Put your cash in investments that you can be confident. I usually suggest that people invest for the long term. Do not be in a hurry to sell for short-term gains because you will be eroding the capital gains on your investment.
3. Don’t put all of your money in one place- make sure that you invest in at least a few different things. I usually suggest mutual funds and individual stocks for the long term.
4. Look for ways to trim your spending, and the best place to this is by looking at your daily routine. Do you stop for at the nearest Mr. Biggs every morning for breakfast? Do you eat an expensive lunch everyday with your colleagues at the nearest fast food outlets? Do you smoke or drink habitually? Do you subscribe to magazines and cable channels that you do not fully utilize? Do you withdraw from other financial institutions ATMs rather than your using your banks’ATM? Making a change can recoup huge sums of money, but many would be investors forget about them and instead spend their time wondering how to increase their investments net worth.
5. What happens if you lose your job and another one isn’t immediately forthcoming? If you have an answer that does not involve panic, you’re on the right track. However, if you don’t have an answer that doesn’t involve panic, then you’re not prepared to be investing. Keep at least a few month’s worth of salary for emergency funds i.e. money that you can run with when you need it.
6. Believing that your future self will take care of it – I know a lot of people that tell themselves this when indulging in impulsive purchases, instead of investing. However, your future self might be unemployed, in poor health or financially bankrupt.
7. If everyone else is doing it, don’t do it. You dream of big things, but then keep going through the same routines. What keeps you from international travel, having that nice care or house? A lack of plan, that’s what. Start looking at what it would really cost, then break it down into small pieces that you can wrap your hands around. Piece by piece, you can have the kind of life you want instead of wandering through life.
8. Don’t you ever think that you’re a know it all investor – the second you believe that, the second your investment portfolio will fall apart. Don’t make frequent trades or the fees and commission will eat you alive.