5 Financial Mistakes You're Making Right Now That You Need To Cut Out
Take a guess who the biggest financial enemy of your wealth is?
I hate to be the bearer of bad news, but it’s true, you are you own worst financial enemy.
And the worst part is that most people sabotage their finances, without ever even realizing it!
And there are a bunch of ways they do this…
That’s why I want to share with you the 5 specific things people do to shoot themselves in the financial foot.
Are you making any of these money mistakes?
5 Money Mistakes You Need To Cut Out Today
Money Mistake #1: Living Above Your Means
This is a one-way ticket to Debtville.
If you find yourself urgently anticipating your next salary to pay your bills, I have some bad news for you.
You’re living beyond your means.
If you find that this describes you, you need to budget better.
Don’t get me wrong though, I totally get it!
We’ve been brought up in a modern world where if we see something we want, it’s pretty easy to get it right away.
Credit cards, accounts, advertising deals…
Companies are getting smarter and smarter in the fight to acquire new customers.
The problem comes in where the tactics they employ aren’t always best for you, your budget and your means.
It’s easy to see something we like, and tell ourselves that we deserve it.
Especially when the advertising and marketing reinforces this belief.
The reality is though, if you can’t afford it, don’t buy it.
Debt takes longer to pay off than any of us would care to admit, so it’s just not worth getting into in the first place.
Money Mistake #2: Not Saving For Retirement
According to a recent report by Sanlam, a retired couple will need R600,000 between them a year to be considered ‘financially healthy’.
However, the national average is sadly just R202,608.
Whether you agree with those numbers or not, it’s food for thought.
In fact, only 10% of South African retirees are able to maintain their standard of living in retirement, and of those actually retired as many as 60% experience a shortfall between their income and expense in retirement.
Imagine getting to retirement and not being able to afford it?
Well, this seems to be the reality for MOST South Africans.
And it’s because they don’t save enough for it.
It starts early too.
Most millennials or even youngsters simply don’t start saving for their retirement because they think it’s far away, or something they only need to do when they’re 40.
Unfortunately, once they get there, they realize they should have started 10 or even 20 years ago.
You really should start saving for your retirement the second you start earning money, or get your first pay cheque.
If you don’t you risk giving your money less time to do its thing, and less time to compound, giving you an inferior retirement quality.
So it’s not enough to just save for retirement, but you need to save the right amount.
If you’d like to find out more about how you can boost your retirement, click here.
Money Mistake #3: Not Having an Emergency Fund
I’ve used my emergency fund to save my butt a number of times.
And I’m not ashamed to say that!
Life happens, debt happens, emergencies happen.
It’s just the way things are.
Fighting that only leads to trouble. At one point or another you will need some extra cash for an emergency.
And that’s precisely why you need an emergency fund.
A lot of people I know simply don’t have one.
And they end up resorting to credit cards or loans to pay off major problems.
This kind of debt takes months or even years to pay off.
And it’s so avoidable.
Medical emergencies, car services, engine problems, losing jobs…
These things happen, whether we like to admit it or not.
A good rule of thumb is to create an emergency fund that has at least 6 months’ worth of basic expenses in it.
That way if you lose your job, your car’s engine goes on the frizz, or if you have a medical emergency, you have the means to take care of it.
Not to mention you don’t put your future finances at risk.
Life happens, it’s just far better to be prepared.
Money Mistake #4: Not Tracking Your Expenses
Without looking right now, do you know where your money goes every week and month?
Seriously, can you account for every cent you earn, because if not some of it might “disappear” towards unnecessary things.
You don’t need to approach your finances like a robot or an overpaid accountant.
But you do need to know where your money is going every month.
A few years back I did an “expense audit” as I wanted to put more away each month to my investment portfolio, but didn’t have much to spare.
So I decided to look into my finances to see where I could shave a little off to make this happen.
I was quite shocked at what I found!
The amount of money I was spending on food, despite grocery shopping, was embarrassing to say the least.
Snacks, meals, chips and chocolates.
It all added up to a few hundred bucks every month. Sometimes more!
I wasn’t aware of where all my money was going, and I’d wasted some of it because of this.
Are you tracking your expenses?
What percentage of your income are you spending on your bond?
What about travel or petrol?
How much are you spending on food, including both groceries and restaurants?
How much do you spend there, and most importantly, how much are you saving?
You should know the answers to these.
They’re important questions.
Money Mistake #5: Bad Spending Habits
I’m a recovering shoeaholic.
I used to buy way too many shoes.
I’m almost afraid to count them.
Thankfully I’ve reformed, and reeled in my bad habit.
But the lesson remains.
A lot of people have bad spending habits.
Things they spend too much money on, or particular vices they might have.
A friend of mine loves golf, and he admittedly spends a lot of money on the sport.
And it can range depending on who you speak to.
Booze, clothing, restaurants, take-aways…
Spending some money on these things is fine, but too much is just irresponsible.
These kinds of things can eat away into your monthly finances (just take a look at my food example from Step #4)
Irrespective of what your bad habit is, you need to focus on it and target it, and then work to eradicate it.
The quicker you can cut these bad habits out, or minimize them, the better it’ll be for your financial future.
Avoid These Money Mishaps And Build Real Wealth
Nothing I’ve mentioned above is over the top or hard to fix.
It just takes a little time and effort.
Something most of us pretend not to have.
These are things that could affect your overall financial well-being, and kill your quality of life.
So you need to cut them out as soon as you can.
- Don’t live above your means
- Save for retirement
- Create an emergency fund if you don’t already have one
- Track your expenses and know where your money is going!
- Cut out any bad spending habits you might have
Not only will your wallet thank you, but your future quality of life could actually depend on it.
Avoid these money mistakes and put your finances on the path they deserve to be on.
Until then, here’s to good money management.