In my experience, if you want an easier life, don't do any of the things below! This is a list I compiled of financial mistakes people make all the time that can usually be avoided.
- Putting off saving for the future
- Especially Roth IRA or matched 401 K!
- Employer paid benefits are the best free money
- Time value of money - rule of 72
- Not building an emergency fund
- Accumulating debt when not absolutely necessary
- For credit card debt always pay in full monthly
- “It is the debtor that is ruined by hard times.”
- Times have changed as far as Americans attitude toward mortgages. Do the math on the tax savings of a mortgage and see what it really means.
- Proverbs 22:7 "The borrower is servant to the lender"
- Not investing
- You want your money to work for you.
- Making bad investments
- AKA - educate yourself before buying
- Examples
- time shares
- certain insurance products like annuities.
- Do NOT trust that someone else can handle your finances better than you. This will surely lead to bad investments.
- Putting all your eggs in one basket
- Having all your money in your employer stock would be an extreme example.
- “Marginal propensity to consume” - Typical Americans spend more when they make more money. If they could save more when they make more they would be happier/better off.
- No financial plan or goals.
- This goes beyond a budget. Need to know what your goal is. Want to retire early? Want to start your own business?
- How can you manage where you are if you don’t know how you are doing at least monthly?
- Living beyond your means
- Simple – spend less than what you make
- People who save 50% of what they earn are able to retire REALLY early and comfortably. “Work to live, don’t live to work”
- Spending money you don’t have yet, even if you expect to get it in the future (like an annual bonus)
- Paying bills late
- Being overly generous with your treasures
- Take care of your needs first so someone else doesn't have to take care of you.
- This includes saving for retirement (or other personal goals) before saving for someone else education.
- “Christmas is the season when you buy this year’s gifts with next year’s money.” - kinda ties in #9, but makes this point too.
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