Successful financial planning doesn’t happen by accident. It’s a process that, if followed carefully, will afford you the lifestyle of your dreams. Half the battle is in avoiding the mistakes and pitfalls which trip most people up.
Let’s take a look at 5 common financial planning mistakes which will delay your progress.
Not having a plan 📋
There’s an old quote, “A goal without a plan is just a wish.” That’s 100% true here. You must create a good plan and follow it if you wish to be financially healthy. Assess your financial health. Look at your debts. Decide how much you want to save, invest, etc. Aim to improve gradually.
Not taking ownership of a debt problem and remedying it swiftly will only cause it to snowball and become more difficult to handle. Too often, people fear looking at their debts.
It all just seems too overwhelming. So they mentally shelve it away into the dark recesses of their mind thinking that the problem will go away. It almost NEVER does.
You must address your financial troubles as soon as possible.
‘Lifestyle creep’ is a term used to describe a situation where you start spending more just because you’re earning more. For example, you may have been on a tight budget before when you were earning a salary of $3,000 a month.
So you find a new job that pays you $4,500 a month and now have $1,500 extra disposable income. However, instead of paying off your debt and saving more, you decide to sell your old car and buy a newer flashier model. After all, you can afford it now.
Unfortunately, what happens next is that a sizable chunk of your extra $1.5k is going towards paying for the new car’s monthly installments. You’re back on a tight budget…because you’ve taken on new commitments.
Just because you earn more doesn’t mean that you have to spend more. Like the quote at the top
of this email says, what matters is not how much you earn, it’s how much you keep.
Lack of financial literacy 📕
One of the biggest problems with the education system is that it doesn’t provide a financial education to the students. We’re not taught about taxes, credit cards, budgeting, investing, etc. We touched on this a little in this week’s M.O.M. Live.
It makes you wonder if this is by design so that the masses remain clueless. After all, for the rich to get richer, the poor must stay where they are. But I digress…
In order for you to invest wisely and manage your money well, you’ll need to educate yourself. Most people don’t, but you must – because you want to be financially secure and independent, and build generational wealth.
Not building wealth 💵
Even if you’re a salaried employee, you should constantly be looking for ways to increase your net worth. Start a side business and you may earn even more than your day job. Motivational guru, Jim Rohn, used to say, “Profits are better than wages.”
The fastest way to save more is to earn more. The fastest way to retire comfortably is to earn more. The fastest way to pay off debt is to earn more.
Notice the pattern here?
You must do whatever you can (legally and ethically) to earn more. Then you’ll be able to become debt-free, invest well and retire in comfort.
Be aware of these 5 financial planning mistakes and avoid them to ensure that you save up a sizable nest egg, and have enough money to last you into your golden years. Start planning today.