Lack of Planning
It’s impossible to know the future, but it is possible to have several plans in place to deal with things as they come. Generally, having some money in savings can make dealing with life’s minor and major disasters a lot more manageable. Rich people often don’t just have fewer problems in their lives, they’re just better able to deal with them better. That means they have an emergency fund in place, they’re saving for their retirement, and they have insurance that covers their major assets.
Not Updating Your Financial Plan
They also frequently update their plans so that they are prepared to deal with expenses such as car repairs or college tuition. When unexpected money comes in, they will save it until it is needed rather than spend it right away.
Relying too Heavily on Credit Cards
If you frequently rely on credit cards because you can’t afford to buy things with the cash you have available, then you’re going to have a hard time building wealth. Managing your spending is one of the first things that you have to learn if you have any hope of becoming rich.
Not Creating a Budget
Develop a budget and spending plan that has you paying off bills within your means. Stick to it, and soon you’ll be able to put money into a savings account instead of spending it on repaying loans.
Spending More Than Your Income
If it seems like you never have enough money after paying your bills, then you have to start making cutbacks in your lifestyle. This won’t be easy; people who have built wealth have had to sacrifice a lot more than a cable tv subscription. Expect to live in smaller house and drive an older car than many of your peers. If you can have money left over the day before you get your next paycheck, however, you’re on the path to building your financial future.
Most of the mistakes that people make when it comes to investing involve either putting their money into something they didn’t understand, following the crowd into a popular investment, and/or choosing investments that are inconsistent with their goals. The best way to avoid these issues is to learn as much as you can about potential investments and keep your portfolio simple. Start by identifying your goals; do you want to save for retirement, save for a house, or get out of debt?
Not Creating Investment Timelines
Base your investment timeline on this goal. From there, choose assets that match with your timeline, goals, and risk tolerance. Choose CDs and government bonds for short-term investments with money that you can’t afford to lose, stock funds for medium-term investments that need to grow quickly, and consider a combination of these items for long-term goals such as retirement or college savings.
You Don’t Think You Can Do It
Chanting “I believe in me” won’t get you rich, but believing that anything you try is doomed from the start is a guaranteed way to ensure that you’ll be poor for the rest of your life. People who believe they can’t stick to a budget or save money will discover that they really can’t; something will always come up in life that will “require” them to spend money. On the other hand, people who start with even the smallest amount of money and the will to save will discover that life will get a little bit easier as they save. Even $100 in a checking account is enough to protect you from bounced check fees. Saving $500 can cover most insurance deductibles or pay for a small car repair.
You want to help everyone.
As soon as you start to collect even a small amount of wealth, friends and family members will try to get it from you. While some of these people may be in desperate need of help, many of them simply want you to solve their problems for them. Giving away your savings to everyone who made bad decisions and can’t pay their rent or fix their car means that you’re constantly starting back at zero.
Not Organizing Your Savings Donations
If you want to help, budget a set amount of money each month as charity. Keep this money in a separate account if you have to, and let it accumulate in months when no one is asking for your help. When someone comes along with a problem that you can’t say no to, give them only the money in this fund. That way, you can still help, but their problems won’t drag you down as well. On a similar subject, also avoid getting into joint loan applications or co-signing for people as a way to help them. This is one of the quickest ways to lose your savings over someone else’s bad decisions.