5 Critical Financial Mistakes

Posted on Posted in Finances

Nobody wants to make critical mistakes with their finances, but millions do it every day.  Fortunately, these 5 money mistakes are very easy to avoid.

1. Failing to Save

Number 5
Image by Steve Bowbrick

There is a reason Saving money is number one on this list.  Nobody wants to save money and they have a million excuses why they can’t.  Unfortunately, the alternative to saving money can be working your entire life and winding up broke.  If you never save money, you’ll never have any.  Save at least 10%.

2. Neglecting Income

Income is a key component of any financial plan but it is often neglected.  A higher income can lead to greater security and opportunity, provided some of it gets put away.  It is much easier to save, invest and create a secure future with an above-average income.  Work tirelessly to get paid what you deserve.

3. Failing to Invest

A savings account is considered an investment, but it’s a terrible investment for accumulating wealth.  The same can be said for CDs, money market and treasury bonds.  Any deposit yielding less than the rate of inflation is a guaranteed money loser.  The stock and real estate markets are scary and unpredictable.  You can win or lose big with these investment.  However, if you ever want to accumulate wealth, you have to choose investments that grow over the long term.

4. Failing to Insure

Risk is a nasty prospect and a danger to your future prosperity.  Most people underestimate their tolerance for risk, until they are facing a catastrophic loss.  Insurance is never a wise place to cut corners, especially if you have assets to protect.  Make sure you are insured properly, with all of the necessary policies and coverage, by a company you can trust to pay the claims.

5. Relinquishing Control

Never, ever, ever relinquish control of your financial assets.  Never let a financial advisor, investment firm or insurance company control your assets.  If you keep assets in your own accounts, you are considerably less likely to lose them.  The news and financial papers are littered with stories of people who lost everything to unscrupulous firms and advisors.  Millions of others are losing money every day to poor investments they can’t leave, such as annuities and whole life policies.

The Bottom Line

The bottom line is that managing your finances is profoundly easy.  The hardest part is getting started.  The thing that makes you successful is sticking with it.

“Learn from yesterday, live for today, hope for tomorrow.”

– Albert Einstein

Recommended Reading

Len Penzo – 5 Crazy Ideas that Resulted in Million Dollar Paydays
101 Centavos – Long-term Investing versus the Quick Buck
Don’t Quit Your Day Job – Should you Invest Actively or Passively?