10 Mistakes People Make With Their Money
Posted on Oct 28 2008 | Tagged as: Finance
Because these mistakes are so critical, they are nothing to laugh at. Are you making any of these mistakes with your hard-earned cash?
1. They haven’t figured out the amount of money they actually need every week to do better than just pay their bills. They don’t have a budget set up.
The correct definition of a BUDGET is: the calculation of the amount of money needed for an organization to function and achieve its purpose. If you are happy with just being able to pay your bills, and you don’t pay yourself first into some type of savings plan, you’ll stay poor while you make your vendors rich. Every vendor that you pay is in business to make profits. Shouldn’t you be running your business to make a profit? Your income target must include a profit or the enterprise will fail financially.
2. They don’t work out ways to make more money than they currently need, and then willingly do whatever it takes to carry out their plan.
By UNDER estimating the amount of money needed to do better than just break even, they almost always set their income target too low and lose more money existing on credit instead of getting busy raising their income. Everyone can find ways to increase their income; it is more often the ‘willingness to do whatever it takes’ that is the problem.
3. They habitually spend more money than they make.
Using your money to buy the ‘appearance’ of being wealthy is a deadly activity. I call this type of spender a Gratification Groupie. This can catch up with you quickly and eventually can drown you in debt. Being in this situation causes constant worry about money and makes for lots of sleepless nights. Money truly cannot buy happiness. But, doing something productive and worthwhile and knowing you are appreciated for it will make you feel like you are on top of the world.
4. They don’t figure out what they will need in the future and set aside a little money every week in order to pay cash for the purchase later.
Buying things with a credit card because you are short on cash is committing your future earnings to the credit card company. You are then working for the credit card company as an economic slave. The correct method to buy things, especially big ticket items, is to put away a small amount every week until you have enough cash to purchase the item, and then go out and negotiate a big cash discount. The guy with the CASH IS KING!
5. They buy products and services based on WANT rather than on NEED.
Buying decisions should be based on how your buying the product or service will help you produce more income for you. Honestly, do you want the latest cell phone that features email retrieval and text messaging because your friends have one, or do you need it to work more efficiently because you are out of the office making more money?
6. They don’t put money into a retirement savings plan so they have it for use later in life.
Are you counting on the younger workers’ future production to supply you with Social Security income when you stop working? Boy, that is a huge gamble! Even though the government says the annual cost of living is rising 3 – 3.5% a year, the truth is that it is going up 8 – 12% a year. You have to make that much more income just to break even. Why does the government say it is only 3 – 3.5%? Unfortunately, it’s because the government has to increase Social Security payments every year by the percentage they report. The Social Security system is already bankrupt and those living on Social Security alone are going in that direction.
7. They don’t build up multiple sources of income. If one source dries up they are in trouble financially.
The expression ‘don’t put all your eggs into one basket’ is true today, especially when it comes to income sources. Locate profitable products or services that you can add, or business ventures you can participate in that are ethical, and have a really good chance of producing a residual income.
8. They get stressed out about how little interest banks pay on savings accounts while they are being murdered with substantially higher interest rates by carrying balances on their credit cards.
If you have high credit card debt, you are better off using excess cash to reduce the debt and stop the high interest payments rather than attempting to earn interest from the bank. As you reduce your debt, you should also keep enough cash on hand to cover a few months of living expenses. Once the debt is gone, or will be soon, then start investing the excess money in investments that return real growth.
9. They get stressed out about ‘the economy’ in general.
I’m surprised that people actually worry more about ‘the economy’ than about their business or household failing financially. They stress over what the media is reporting about ‘the economy’ when that is something they can’t control, while never confronting how they are affecting the economy of their own business or household, which is what they CAN control. A rise in unemployment is no cause to worry. Small business’ creation of new jobs greatly exceeded the number of jobs lost in big corporations, according to the latest ADP report. A bank failure is no reason to panic. Banks receive funding for bailouts from the FDIC and other investors. Nobody is waiting in the wings to bail out your failing business. That is entirely up to you. So keep promoting your business, stash some money, and sleep like a baby while the dire news about ‘the economy’ rages around you.
10. They anticipate surviving financially without taking full responsibility for controlling their financial future.
There is a simple solution to money problems. Cut expenses, increase your income, and correctly manage what income you bring in. It’s not only about how much money you make, it’s what you do with it that determines your financial condition.
Correct money management is something educational institutions don’t teach. People receive false information and bad advice about how to handle money. So then they make these silly mistakes, get into worse trouble, attempt to solve the problem using credit, wind up in more trouble, and then go looking for debt relief.
Fortunately, there is a proven, inexpensive, money management software system that can reverse the money management mistakes a person has made in the past, and keeps them from making the same mistakes again. It is an old-school system your great grandparents used prior to the days of credit cards. Very rich people understand and use this system today.
Sandra Simmons, President of Money Management Solutions, Inc., has years of experience helping professionals and families manage their income to achieve their financial golas. To learn more visit www.moneymgmtsolutions.com
- Sandra Simmons