5 Money Mistakes You Don’t Know You’re Making

Have you ever felt like the whole world is a tuxedo, and you are a pair of brown shoes?

We’ve all been there.

Usually it’s just a passing embarrassment, but if your ignorance costs you money, there can be life-changing consequences.

5 Major Money Mistakes

  1. Failing to live on a budget

    • Unless you’re the federal government, you need a budget.

  2. Failing to invest for the future

    • I said invest, not save.

  3. Failing to protect your assets

    • You’ve worked hard to get what you have. Part of the responsibility that comes with owning things of value, such as your car, your home, your health and your life is the responsibility to protect them.

  4. Failing to confront fiscal issues in your marriage

    • A marriage should be a partnership. Partners disagree occasionally and husbands and wives will certainly encounter many disagreements along life’s path. However, the most destructive disagreements seem to revolve around money issues. If you and your spouse do not confront these issues honestly and openly, your marriage is destined for disaster.

  5. Failing to define your life goals

    • If you don’t know where you are going, how are you going to get there? Establish goals and measure your progress.

The Budget

The main reason for creating a budget is to ensure that you do not spend more than you earn. The second, and equally important benefit, is that a budget will show you where you are spending your money. This makes identifying wasteful spending habits easier and affords you an opportunity to correct them.

If you have a rudimentary knowledge of Excel spreadsheets, creating a budget is relatively painless. If you don’t have access to Excel, drop by the stationary or office supply store and pick up a columnar pad.

For most of us, the only true constant in our budget will be income. Expenses, on the hand, tend to vary from month-to-month for a variety of reasons. For this reason, the budgeting process will not be accurate until you have tracked your income and expenses for a full year. That doesn’t mean it will not have value. It simply means that its accuracy will suffer until you have been through a full cycle. Even then, you will find that changes in your life will require that you adjust your budget to meet changing circumstances. The sooner you start the process, the more quickly it becomes a valuable tool.

Investing

In the simplest terms saving money is significantly different from investing money. Developing an investment strategy early in your life allows you to take advantage of that miracle known as compounding. Compound interest, for example, allows you to earn interest on your interest. The same can be said for dividend reinvestment programs (DRIPs), available with many stocks and ETFs.

Asset Protection

In simple terms, this is the acquisition of appropriate levels of insurance to protect your car, home, health and life. For some of the truly affluent, it goes beyond these things.

Confronting Financial Issues in Your Marriage

Your spouse is your partner. Disagreements about money or the lack thereof must be resolved or your goals cannot be defined. If you can’t come to an agreement on financial goals, how will they ever be achieved?

Setting Goals

You must establish financial goals and measure the progress you are making toward achieving them.

Consider a Financial Planner

The biggest difference between you and Warren Buffett is experience. Finances can be a complex subject and while you may be able to handle some of the basics we’ve discussed here, the services of a financial planner can be invaluable. Why? They have the experience!

Financial planning is the logical development of an action plan to achieve financial goals in the context of your income and assets.

Professional financial planners are particularly helpful in resolving a couple’s differences with regard to financial matters. As a third party, they can exercise unbiased, professional guidance, appreciated and acknowledged by those on either side of a financial difference of opinion.

While some may view the expense associated with the services of a financial as beyond their means, this is typically not the case. In fact, most would agree that their financial planner saved money and/or created wealth far exceeding any fees associated with the service.

Do you have a financial planner? Have you made any of these money mistakes? If you’re interested in one on one financial coaching click here.

0 comments

  • These are all great things to keep in mind! We really want to start living on less than we already do. Have to make a plan for that!

  • When do you plan on having the plan completed?

  • I’m not making any out of the 5 mistakes and I’m hoping to stay that way. Financial planners actually play an important part in our lives. Many people resist them because of financial apathy and I hope this will change. Great post!

  • Great post!! If you could, I believe a post that deals with more of personal finances within a marraige would be highly beneficial. For example, how many accounts, ie savings and checking, should a couple have? Look forward to reading this post in the future. Thanks.

  • Asset protection is what I’m working on right now, as I’m pretty much set in all the other regards. I’ve recently formed an LLC for my online and real estate businesses and am even considering forming a legal entity for my equity investment portfolio. You never know when you are going to get sued in America!

  • I think this depends on the family and what each account is for. How many do you currently have?

  • I have 3 accounts currently. Two checking a and one savings.

  • I totally agree with all of these. As a married person, it is important that my partner and I should discuss about money matters openly and honestly so that we can have specific goals to achieve and of course, we should be helping each other to live up to our budget and invest for our future.

  • What’s wrong with just having those?

  • I agree 100%. if your partner can’t hold you accountable then who can?

  • Imran /

    I’ve tried using a financial planner before however the fees and commission charges mean that I’ll have to get a return of more than 5% per annum to make any profit at all. I have taken the time to education myself in personal finance and I am now investing most of my money in index based funds with really low charges (Charles Schwab Index Fund). Financial planners can offer good information and research however sometimes it’s not enough especially when they charge 3% upfront and 1% trail.

  • Nice article, I admit that setting goals was one of my Achilles heel however personal finance blogs have inspired me to have a long term, short terms and medium term goal. Consequently my goals are to pay my mortgage off as soon as possible (40% there), Increase my income to £10,000 per month (30% there) and only work 2 days a week (30%) there. thanks for sharing the insights. I’m really starting to like this blog, keep the quality content coming.

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