There are plenty of steps that you can take to help you become financially successful, but all your hard work will end up being for nothing if you’re undermining the financial success you’re seeking to attain. The financial steps to success are important, but understanding the actions that’ll ensure financial failure are just as important. It usually only takes a single financial blunder to wipe out much, if not most, of the financial progress you’ve made. Here are ten of these blunders that you want to avoid or resolve as soon as possible to ensure the long-term health of your finances.
Spend More Than You Make
This is the foundation of all personal finance. If you can’t live within your means, you’re going to find yourself in financial trouble no matter how much money you make. While you may be able to get way with spending more than you make for a while, it’ll eventually catch up with you. At some point you’ll have to make up the difference and when that point arrives, your finances will not be happy.
Live Paycheck to Paycheck
While living paycheck to paycheck may seem better than living beyond your means, it still ensures failure in trying to meet your financial goals. Again, this applies no matter how much you make. Paycheck to paycheck living fails to take into account unexpected expenses that are a part of life. While you may be able to pull off the paycheck to paycheck game for a while, it’ll only be a matter of time that something unexpected puts you into debt which is a difficult hole from which to escape.
Trying to Keep up with the Joneses
The Joneses aren’t who you are competing against. In fact, what they’re doing and buying likely has very little to do with your own financial goals. The reason that what the Joneses are doing may look appealing is because you have failed to understand your own financial goals. By adopting the goals of the Joneses (who may not know their true financial goals because they may be trying to keep up with the Smiths) instead of figuring out what financial goals are truly important to you, you’ve guaranteed that you will never reach them. Forget the Joneses and take the time to figure out what’s important to you.
Not Knowing Your Financial Goals
If you don’t know where you’re driving, the chances of you getting there are slim. The same holds true with your finances. To succeed, you need to know where you want to be financially. The way to achieve that is by knowing what they are and then creating a map to reach them. Not knowing your financial goals is like wanting to get to a vacation spot using a blank map.
Letting Money Control You
It’s not about how much you make, but if you make enough to do the things that are most important to you. Money is a means to an end, not the end itself (after all, it’s nothing more than pieces of paper printed with ink). Financial success isn’t dependent on how much you have, but rather whether you can you attain what’s important to you with the amount you have.
Failing to Improve Yourself
Your education doesn’t end when you graduate from school. If you’re unwilling to improve yourself, you and your finances will stagnate. Improving yourself is a never-ending process (who do you know that is perfect?) and it’s an essential part of keeping your long-term financial well-being.
Relying on Others to Take Care of Your Money
Rarely do those who take care of your money have the same interest in what ultimately happens to your money as you do (they’re probably more focused on making money for themselves, not for you). While it’s perfectly acceptable to rely on others to give you suggestions and help you think through financial decisions, you should always be an integral part of the decision process. If you rely on others to take care of all your financial interests without you having any oversight, you shouldn’t be surprised when money is invested and lost in ways that you may have never allowed had you known.
Invest in Things You Don’t Understand
If you’re goal is to quickly lose the hard earn money you’ve made and start from square one again (or even in the hole), start investing in things you have no idea about. The problem isn’t that the investments are bad in themselves, but most investments have risks and the only way to evaluate them is to understand the investment. When you have no clue what you’re doing, that usually means that others who do have a clue will make money at your expense. No matter how much uncle Joe talks about what a great investment it is, place your money elsewhere until you are confident you understand everything about it.
Being Financially Afraid
Just as being to aggressive can ensure financial failure, being afraid to take any risk at all will also almost always ensure it. To grow your money to meet your goals means taking calculated risks that bode in your favor over time. Not doing so will result in your finances treading water, if not sinking, and falling short of your goals.
Ignoring Your Finances
It seems that many people believe if they simply ignore their finances, then things will get better or somehow take care of themselves. While it’s a nice hope, it’s nothing more than a fantasy. Reality says that ignoring your finances will lead to all types of trouble that ultimately ensure you fail to reach your financial goals.
These are some of the more common blunders that people make that end up hurting their finances. By avoiding these financially destructive steps, you’ll greatly increase the odds that you’ll meet your long-term financial goals.
(Photo courtesy of Nick Allen)