When it comes to your money life, the opportunities to make mistakes can come fast and furious. If they are not corrected, they could lead to a compounding effect that can be devastating to achieving the goals you value most.
Money Mistake #1: Not taking ownership of your financial life. This common error, for many, begins early in life with the absence of solid financial knowledge. And let’s be clear: most of the time, this ignorance is not our fault as it happens during childhood. If, as a youngster, your parents or guardians didn’t provide a sound foundation for money management through money lessons, you come into adulthood without the benefit of confidence in making good money decisions.
The formative developmental years are the prime time to learn how to defer gratification, learn to save, and make choices that are wise and satisfying. By learning simple money lessons when you’re younger, you are able to take these skills into real situations and decisions in adulthood. Your younger years are also the times to make mistakes and learn what not to do, typically without life-altering consequences.
If, as an adult, your lack of financial knowledge and comfort causes you to avoid making decisions and taking ownership of your situation, you could find yourself mired in debt or at the very least, living hand to mouth.
Taking ownership means understanding your numbers: what you earn, spend, save, owe. It means setting goals and actively working towards achieving those goals. If you’ve made mistakes in the past, recognize them, own them, learn from them, and move on in a positive direction.
Money Mistake #2: Not asking for help. Asking for help is vitally important. Making financial decisions doesn’t include a step-by-step guide. Financial matters are subjective because they are based on how you see the world, what you want out of life, what you value, what you fear, etc. All things that are shaded by your own personal belief system.
Asking for help can be challenging because of a variety of factors, including who you ask and their level of knowledge and understanding. But most of all, everyone should feel that the person they are working with is THE BEST.
A good place to start is with NAPFA (National Association of Personal Financial Advisors). You can look for a Fee-only advisor in your area. It’s a place to start your investigation, but you need to learn a lot more before you hire the person or firm to help you.
Money Mistake #3: Ignoring Life Transitions. Life transitions happen; some expected, some not. Everything from getting married to creating an end of life plan; from expecting a child to divorce; from death of a spouse to paying for college; from a job loss to caring for an elderly parent or special needs child. Without appropriate consideration and planning, life transitions can destroy your financial life and put your stability in jeopardy.
While the spotlight remains on the daily movement of the stock markets, people ignore aspects of planning that they can be aware of and prepare for, to some degree. It requires a mindset that provides for open discussions of all possibilities and transitions that are likely given all available information. The conversation needs to occur on a regular basis, at least annually.
Take for example, your work life. Have you considered whether your industry, company, or position are in danger of being changed, moved, or eliminated? Do you have a wide enough view of your skill sets and relationships in light of your job? The days of guaranteed employment or that companies that will “be around forever” have proven to be a fiction.
Know what you can control and what you cannot and work with your planner to attend to those issues with determined focus. Chances are, you might not be able to satisfy all the issues to the degree you would like, but understanding the issues and making rational decisions can put you in the best position possible.
If you can avoid these three big money mistakes, you increase the possibility of living within your means, with purpose, and centered on your values. Navigating life can be difficult; and adding money challenges can only make it more so. Take ownership, ask for help, and be mindful of life transitions. It’s a great way to set the stage for the best life possible.