Even though it’s not always obvious, we carry lots of assumptions and attitudes about money that might not be grounded in reality. How we perceive wealth and finances can impact how we make decisions, prioritize, and handle the money that we have. Here are a few common money mindsets that might be holding you back from reaching your full potential!
It’s simple, right? The rich are swimming in cash, so they’re able to save. They get to build businesses and live out their dreams. The rest of us have to live paycheck to paycheck, shelling out our hard earned money on rent, groceries, and other essentials.
That couldn’t be further from the truth! Sure, you might not be able to save half your income. But you might be surprised by how much you can actually stash away if you put your mind to it. And however much you can save right now, little as it might be, is much better than putting away nothing at all!
On the other side of the coin (get it?) is the notion that you have to save every last penny and dime that comes your way. There are definitely people in difficult financial situations who go to incredible lengths to make ends meet. Just ask someone who survived the Great Depression! But most of us don’t need to haggle down the price of an apple or forage around for firewood. And sometimes, the corners we cut to save a buck can come back to bite us. Set spending rules and boundaries for yourself, but make sure you’re not just eating ramen noodles and ketchup soup!
There are definitely times when you might not feel like you need to be proactive with your finances. You don’t feel like you’re spending too much, debt collectors aren’t pounding down your door, and everything seems comfortable. Budgeting is for folks with a spending problem, right?
The fact of the matter is that everyone should have a budget. It might not feel important now, but a budget is your most powerful tool for understanding where your money goes, areas where you can cut back, and how much you can put away for the future. It gives you the knowledge you need to take control of your finances!
Breaking mediocre money mindsets can be difficult. But it’s an important step on your journey towards financial independence. Once you understand money and how it works, you’re on the path to take control of your future and make your dreams a reality.
That’s because you’ve done it—you’re going to be earning a lot more money with that raise. The first thing that pops in your head? All the fancy new things you can afford.
Dates. Your apartment. Vacation. They’re all going to be better now that you’ve got that extra money coming in.
And to be fair, all of those things CAN get substantially fancier after your income increases.
Why? Because your lifestyle became more extravagant as your income increased. Instead of using the boost in cash flow to build wealth, it all went to new toys.
This phenomenon is called “lifestyle inflation”. It’s why you might know people who earn plenty of money and have nice houses, but still seem to struggle with their finances. The greater the income, the higher the stress. As Biggie put it, “Mo’ Money, Mo’ Problems.”
The takeaway? The next time you get a raise, do nothing. Act like nothing has changed. Go celebrate at your favorite restaurant. Keep saving for your new treat. But you’ll thank yourself if you devote the lion’s share of your new income to either reducing debt or building wealth.
Rest assured, there will be plenty of time to enjoy the fruits of your labor in the future. But for now, keep your eyes on the most important prize—building wealth for you and your family’s future.
Well, unless you win the powerball or stumble upon buried treasure.
The simple fact is that retirement can last a long, long time and often be expensive. According to the Federal Reserve, the average American can expect a retirement of almost 20 years, requiring $1.2 million.¹
How long would it take you to save $1.2 million? Even if you could stash away your entire paycheck, it would likely take over a decade. Factor in the daily costs of living, and decades may become centuries.
Unless, of course, you leverage two simple strategies…
Strategy One: Maximize the power of compound interest.
Strategy Two: Start saving today.
These are time-proven strategies that anyone can leverage. And they can mean the difference between your savings running out of steam or lasting as long as you do.
Let’s start with strategy one: Maximize the power of compound interest…
Compound interest can supercharge your savings. Instead of taking centuries, you have the potential to reach your retirement goals just in time!
That’s because compounding unleashes a virtuous cycle. The money you save grows on its own over time.
But here’s where the magic happens—the more money you have compounding, the greater its growth potential becomes. Even a fraction of your paycheck can eventually compound into the wealth you may need for retirement.
Think of it like changing gears on a bike. Savings alone is first gear—good enough for going down hills or casual jaunts through the neighborhood.
But for reaching greater goals, you need more power. Compound interest is those extra gears—it’s an advantage that can radically improve your performance.
That leads straight into the next strategy: Start saving today.
The longer your money compounds, the greater potential it has for growth. To prove this, let’s crunch the numbers…
Let’s say you can save $500 per month. You find an account that compounds 10% annually.
After 20 years, you’ll have saved $120,000 and grown an additional $223,650 for a grand total of $343,650. Not bad!
But what if you wait another 11 years? Your money will more than triple—you’ll have $1,091,660!
The takeaway? A few years could be the difference between reaching your retirement goals and coming up short. The sooner you start, the greater potential you have to get where you want to go.
No more sporadic saving when you feel the panic. No more burying your head in the sand because you don’t know what the future holds. No more fear that your finances won’t cross the finish line.
These simple strategies can help you go the distance and retire with confidence. Contact me if you want to learn more about building wealth!
¹ “Retirement costs: Estimating what it costs to retire comfortably in every state,” Samuel Stebbins, USA Today, Feb 11, 2021, https://www.usatoday.com/story/money/2021/02/11/retirement-costs-comfortable-in-every-state-life-expectancy/115432956/
That’s because no single source of income or wealth is perfect. They’re all subject to ups and downs, highs and lows.
Think of it like going to the golf range and handing the caddie an armful of drivers. You’ll make powerful drives every time, but what happens when it’s time to putt? Even worse, how will you escape bunkers?
It’s a classic case of too much of a good thing. If you’re a serious player and plan to play for the long run, your golf bag needs a variety of clubs—a few different irons, wedges, and putters—to handle whatever challenges you’ll face during the game.
The same is true of building wealth.
It’s not a silver bullet. But diversification can offer a layer of protection against the ups and downs of the economy. It can also provide you with supplemental income during lean times.
So how can you start diversifying today? Here are two ideas…
Start a side hustle. This simple strategy can diversify your income sources. Regardless of what’s happening at your 9-to-5 job, you can count on your side hustle to help generate cash flow.
Meet with a financial professional. A licensed and qualified financial professional can help you implement diversification in your savings. This could make a huge difference in protecting your wealth from the ups and downs of a changing economy.
Contact me if you want to discover what this strategy would look like for you. We can review what you’ve saved thus far and check your opportunities for diversification.
Have you considered the role your surroundings play in your everyday life? It turns out that one of the easiest ways to bring about change in our lives is actually to change our environments. What if the layout of your bedroom or the distance from your desk to the kitchen was impacting your productivity and decision making? There’s plenty of room for each of us to improve. Here’s how and why making some changes to your environment works.
Making decisions is draining. (Heard of “decision fatigue”? It’s real!) We can only make so many choices per day before we start to run out of steam and need a rest. But we’re faced with countless choices every time we wake up! Should I go back to sleep? Should I shower or brush my teeth first? What will I wear to work? Should I try out that new shortcut to the office? It can become stressful for your brain to struggle with a choice every time one of these little prompts presents itself. That’s why we rely on decision shortcuts called habits.
A habit is just a routine that you regularly perform. Most of the time we don’t even notice that we’re engaging in a habit because it’s second nature to us. And there’s a reason for that. It’s your brain saving energy by going on autopilot to perform an action without having to make a decision. That way you can use the bulk of your mental power on unique and important problems that might pop up during the day, not on thinking about when you should brush your teeth!
What does your brain’s love of shortcuts have to do with your environment? Let’s look at an example.
Your alarm clock is right next to your bed. It goes off every morning at 7:30am. It doesn’t take you long to figure out that you can smack the snooze button and go straight back to sleep with hardly any effort. Before long you’re hitting the snooze button every time the alarm goes off without even thinking about it. You’ve trained yourself to sleep in later by making your alarm easier to turn off. But what if your alarm was on the other side of your room? What if to silence it you had to stand up, walk over, and hit a button? That simple change could give you the jolt that you need to wake up and get your day started on time!
Take a look at your surroundings and ask yourself what kind of behavior it encourages. Is it more convenient for you to grab a soda from the fridge or fill up your water bottle? When you work at home, are you in the middle of distractions like the kids playing or too close to the TV? At work, does your office layout lend itself to productivity or socializing with your co-workers?
It might take some legwork to get started, but try to arrange your life in a way that makes wise decisions easier. You might be surprised by the results!
Most major banks have apps or websites that allow you to transfer funds and manage your account without ever going into a branch. But what about the new generation of online-only banks that seem to be popping up? Can you be a reliable bank without brick and mortar locations? Let’s explore the world of online banks and some pros and cons.
Online banks and physical banks have a lot in common. They’re both places that store and protect your money. They both loan out your money for a profit. So what’s the big difference?
For one thing, banks with brick and mortar locations have high overhead. They may pay rent on properties, maintain buildings, hire managers to operate locations, and pay tellers to serve customers. Online banks typically have drastically lower upkeep costs. Sure, you need to pay developers to keep the system running smoothly and securely, but it’s generally much lower compared to the costs of maintaining physical locations.
So what do those differences mean for you, the consumer? Banks with physical locations will pass on their location upkeep expenses to you, the customer. That means they’re more likely to charge you for opening an account, give you as little interest as possible, and crank up rates on loans for houses and cars.
Online banks aren’t weighed down by those physical locations. They have fewer expenses and don’t have to charge you as much to make ends meet.¹ That means you might get significantly higher interest rates on your savings accounts. They also tend to lean less on fees than traditional banks.²
But there are some drawbacks to using an online bank. You might find withdrawing cash without paying ATM fees more difficult than before.³ Depositing cash might also take some more leg work and research.⁴ Customer service can’t be handled in person so problems must be solved via phone or online chat. Plus, safety deposit boxes are harder to come by with an online bank. In short, many of the old school conveniences just aren’t provided by the new generation of online banks.
It’s important to weigh the pros and cons before pulling the trigger and opening an account with an online bank. Trying to make more with your savings account? You may want to investigate banking online. But if you’re on a strict cash diet to avoid excessive spending, a traditional bank might have some classic services that will come in handy. Talk with a licensed financial professional before you make the decision.
¹ “What Is Online Banking? Definition, Pros and Cons,” Amber Murakami-Fester, Nerdwallet, Mar 25, 2021, https://www.nerdwallet.com/article/banking/pros-cons-online-only-banking
² “What Is Online Banking? Definition, Pros and Cons,” Murakami-Fester, Nerdwallet.
³ “What Is Online Banking? Definition, Pros and Cons,” Murakami-Fester, Nerdwallet.
⁴ “What Is Online Banking? Definition, Pros and Cons,” Murakami-Fester, Nerdwallet.
Maybe your numbers never add up or too many expenses are coming “out of the blue”. You might also feel a sense of dread every time you make a purchase. No matter what you do, this whole budgeting thing doesn’t seem to be working.
Hang in there! Here are a few budgeting potholes that might be slowing down your financial goals and how to avoid them!
Budgets are supposed to help you use your money wisely. They should be a positive part of your life—they’re not supposed to make you feel like you’re constantly failing. But sometimes our passion to save money and get our financial house in order gets the better of us, and we set up budgets that are too restrictive. While coming from good intentions, an overly thrifty budget can actually make it harder to achieve your goals. An impossible to follow plan can make you feel discouraged and resentful. You might even decide that it’s not worth the hassle! Try starting with a more reasonable strategy and then build from there!
Sometimes our budgets are just too complicated to actually be useful. Not everyone loves working with numbers, and sometimes fiddling with spreadsheets can get so overwhelming that we just want to quit. Plus, there’s plenty of room for human error! A good option is to investigate free budgeting sites or apps. All you do is punch in the correct numbers and the magic of technology will do the rest!
Life is constantly changing. Your simple, streamlined budget might be perfect for the life of a young single professional, but will it still hold up in five years? Where will the portion of your paycheck that works down your student loans go once you’re debt free? And when will you start saving for a house?
Take some time every few months to review your budget and see what’s changed. Evaluate what you’ve accomplished and areas that need improvement. Ask yourself what your next milestones should be and if those line up with your long-term goals!
Budgeting takes work. But it shouldn’t be a burden. Cut yourself some slack, prune your process, and stay consistent. You might be surprised by the difference filling in budgeting potholes can make in your financial life!
These words have been plastered all over the news and social media feeds for the last two years. And there’s no sign of it stopping.
As individuals and as businesses, we can’t control the economy.
But what we can control is how we respond to it.
The key is to stay focused on your long-term goals, and make sure your actions align with them.
Here are a few tips on how to navigate economic volatility…
1. Check your emotions. Fear is the natural response to economic volatility. What will happen to your job? What will happen to your business? What will happen to your retirement savings?
Know this—one of the worst mistakes you can potentially make is acting rashly on those fears. Volatility creates opportunity. Don’t lose out on potential because of headlines you read. Instead, assess your situation, what you stand to lose, and opportunities you might have.
2. Stay focused on your goals. It’s easy to get caught up in the day-to-day noise of the news. But if you want to help your sanity—and make sound financial decisions—it’s important to keep things in perspective.
How far are you from retirement? What kind of lifestyle do you want in retirement? What’s your strategy for protecting against long-term losses?
If your goals are in line with your current reality, take a deep breath and ride out the storm. If not, it’s time to reevaluate where things stand and make adjustments as necessary.
3. Review your budget and financial strategy. Once you’ve gotten past the initial emotional reaction, it’s time to take a clear-eyed look at your budget and finances.
There are two critical components to examine here—your emergency fund and your debt.
If you have an adequate emergency fund in place, keep it intact. Resist the temptation to tap into your savings to cover short-term losses. You’ll need your emergency fund for different expenses, like emergencies.
As for debt, make sure you’re not overextending yourself with credit cards and loans that only might make sense when the economy is booming. If you lose your job in a downturn, the last thing you want is high-interest debt hanging over you.
4. Meet with your financial professional. It’s simple—a licensed and qualified financial professional can help stop rash financial decision making in its tracks.
A financial professional can help you see the big picture, keep things in perspective, and develop a strategy that can help you stay on track—no matter what the economy throws your way.
While economic volatility can feel frightening, it’s important to stay focused on your long-term goals. Having the right mindset and guidance can help you navigate a crisis with confidence.
This isn’t to talk bad about your brain—it’s like a supercomputer ceaselessly working to make sense of the world and keep you safe. The trouble is, sometimes it does this by coming up with shortcuts that feel like they should make sense, but can lead to serious errors.
These mistakes are sometimes called mind traps. They can derail logical thinking and lead you astray. And they can have a big impact on your money.
Here are some of the most common money mind traps, and how you can avoid them!
1. All or nothing thinking. This is a classic example of the “great” being an enemy of the “good”. You might feel that unless you can go all out on saving and building wealth, you might as well do nothing. Go big or go home, right?
It’s an obviously flawed line of thinking. Saving even a little is always better than saving nothing. But the temptation not to is still very, very powerful. Why? It might be because of anxious or perfectionist tendencies. Anything short of perfection seems like failure. And that sense of failure is so uncomfortable that it seems safer to not even start.
But here’s the truth—you’ll never go big unless you start small. Waiting for the stars to align, or even to get all your ducks in a row, will result in permanent inaction.
The solution? Commit to save $20 per month (or whatever amount works with your budget). Read one blog article about money. Follow just one money influencer. You might be surprised by the difference that even just a little change can make!
2. Magical thinking. For example: “I’ll start saving when I get a raise.” Spoiler—you won’t.
Why? Because you didn’t start saving after your last raise. What would make this time any different?
This is magical thinking. This time is going to be different, even if you do nothing different. It’s the hope that circumstances will change on their own, and with them, your behavior.
The solution is to be proactive. If you want to save more money, you have to take action. That might mean reworking your budget or setting up automated transfers into savings. It might mean looking for ways to make more money. But whatever it is, do it now. If the “present you” won’t do it, neither will the “future you”.
3. Catastrophizing & personalizing. Have you ever opened your bank account and thought “This is the end of the world?” It’s happened to everyone at least once. Suddenly, you realize you’re far closer to zero than you realized. Worst of all, you’re not sure why.
To be clear, that’s NOT the end of the world. There could be plenty of good reasons why you’ve spent more this month, and there are plenty of ways to get your financial house back in order.
But that’s not how it feels. It feels like defcon 3. Surely this means that you’ll default on the mortgage, lose the car, and ruin your future.
And that catastrophizing almost always leads to personalization. You start blaming yourself. How could you let this happen again? What’s wrong with you? Those negative voices are off to the races, and it can feel impossible to get them under control. And it’s all because you’re looking at your bank balance with no plan.
The solution is to step back, take a breath, and remember that it’s just a number. It does not define you. Sure, you need to take responsibility for your actions. But follow your train of thought. Where are you jumping to conclusions? What are you assuming? If you can catch yourself in the moment, it’s a lot easier to calm those anxious thoughts before they get out of control.
Mind traps are dangerous because they’re so believable. They seem like rational thoughts, but they’re really just faulty logic that can lead to costly mistakes.
The good news is, once you’re aware of them, you can start to catch yourself in the act. And with practice, it gets easier and easier. So next time you find yourself thinking you have to go big or go home, or that your finances will magically fix themselves, or that you’re a failure, take a moment. Write down your thoughts. And then ask yourself—is this really true? Or is it just a mind trap?
It’s a precarious position—few things are more dangerous than being overconfident AND wrong. It’s a direct path to acting rashly and making big mistakes.
And when it comes to money, those mistakes can be costly.
This isn’t speculation—it’s a scientifically studied phenomenon called the Dunning-Kruger effect. Put simply, it’s the tendency for unskilled people to grossly overestimate their own competence. The lower the skill level, the more likely they are to overestimate themselves.
And that plays out in personal finance time and time again.
Think about that family member with yet another hair-brained business idea. Or the NFT-slinging college student who’s certain that one of the .JPGs on his computer will be worth millions someday.
It’s the same pattern—you learn a factoid about money. “Compound Interest makes your money grow.” “Real estate can be lucrative.” “You need to start saving ASAP.”
You take that information and, instead of using it as a foundation to do more research, you use it as ammunition. Now you’re an expert! And experts don’t need to read or learn—they already know everything.
From there, it’s a slippery slope into dangerous territory.
Next thing you know, you’re swept up in businesses you don’t understand, or handing your money to “gurus” who promise get-rich-quick schemes.
It’s not always so dramatic, of course. Overestimating your financial literacy can manifest in more subtle ways—like not bothering to comparison shop for a mortgage because you’re confident you already know all there is to know about home loans.
But the end result is always the same—you make mistakes, and those mistakes cost you money.
So, how can you avoid falling into the trap of overconfidence?
The first step is to acknowledge that it’s a trap. Be aware of the Dunning-Kruger effect and its impact on your personal finances.
The second step is to commit to lifelong learning. Read books and articles, listen to podcasts, meet with a professional—whatever it takes to continuously expand your knowledge.
And finally, be humble. Recognize that there’s always more to learn, even if you’re already pretty savvy when it comes to money.
If you can do those things, you’ll be on your way to financial success. And that’s something you can feel confident about.
You know how it goes. The thought flashes through your mind—”I need to start saving money!”
And then… well, that’s it. You read a few articles on saving and try to spend less, but after a week or two your mind has moved on.
Why? Because all forms of positive change are energy intensive, at least at first. And your brain, smart as it is, likes conserving energy.
So to jump-start saving, you need to take several one time actions that are borderline thoughtless.
Enter automation. It’s a small step with massive return potential.
Like that, you’ve set the stage for dozens of wealth-building actions well into the future.
And what did it take? A few taps over a few minutes.
So what are you waiting for? Automate your savings right now. I’ll wait! Even if it’s $5 per month, it’s a step in the right direction—to build wealth for your future!
But is it really worth the investment? This article looks at the cost of electric cars and whether they’re a good purchase in the long run.
The main way that an electric car can save you money is with its lower fuel costs, especially when gas prices are high. One study found that an EC is 60% cheaper to fuel compared to cars with combustible engines.¹
That’s not all—because they have fewer parts, they can require up to 31% less maintenance. No more oil changes!
Finally, some states incentivize purchasing electric cars with tax credits. These credits can range from a few hundred dollars to a few thousand, making the switch to electric even more enticing. Incentives vary from state to state, so do your research before making your final decision!
But there are serious drawbacks to consider. Many places have yet to build the infrastructure needed for electric cars. An electric car may not be feasible if you live beyond the cities and suburbs.
You should also consider the sticker price of an electric car, which is often higher than gas vehicles. The cost of the car can be offset over time with the lower fuel and maintenance costs, but it’s important to do your due diligence to make sure that the numbers add up for you.
Plus, the consensus seems to be that electric car prices will only drop in the future. Perhaps you should purchase an electric car at some point, just not now.
It’s important to do enough research to know the different benefits of an electric car before you make a purchase. An EC may save you money in fuel costs but they are often more expensive than traditional cars, so it might be hard to justify that investment. It’s worth doing your homework to determine if buying an EC will actually help you save money over the long term.
¹ “Here’s whether it’s actually cheaper to switch to an electric vehicle or not—and how the costs break down,” Mike Winters, CNBC, Dec 29 2021, https://www.cnbc.com/2021/12/29/electric-vehicles-are-becoming-more-affordable-amid-spiking-gas-prices.html#:~:text=Electric%20vehicles%20tend%20to%20have,to%20internal%20combustion%20engine%20vehicles
The average household owes $6,000 in credit card debt alone, and the total amount of outstanding consumer debt in the US totals over $15.24 trillion.¹ It’s a burden, both financially—and emotionally. Debt can be linked to fatigue, anxiety, and depression.²
So it’s completely understandable that people want to get rid of their debt, no matter the cost.
But the story doesn’t end when you pay off your last credit card. In fact, it’s only the beginning.
Sure, it feels great to be debt-free. You no longer have to worry about making minimum payments or being late on a payment. You can finally start saving for your future and taking care of yourself. But being debt-free doesn’t mean you’re “free” to do whatever you want and get back into debt again. It means you’re ready to start building wealth, and chasing true financial independence.
For example, when you first beat debt, are you instantly prepared to cover emergencies? Most likely not. And that means you’re still vulnerable to more debt in the future—without cash to cover expenses, you run the risk of needing credit.
The same is likely true for retirement. Simply eliminating debt doesn’t mean you’ll retire wealthy. When you become debt-free, you can put those debt payments towards saving, leveraging the power of compound interest and more to help make your dreams a reality.
But now that you’ve conquered debt, that’s exactly what you can do! You have the cash flow needed to start saving for your future. You can finally take control of your money and make it work for you, instead of the other way around.
So don’t think of being debt-free as the finish line. It’s not. It’s simply the starting point on your journey to financial independence. From here, the sky’s the limit.
¹ “2021 American Household Credit Card Debt Study,” Erin El Issa, Nerdwallet, Jan 11, 2022, https://www.nerdwallet.com/blog/average-credit-card-debt-household/
² “Data Shows Strong Link Between Financial Wellness and Mental Health,” Enrich, Mar 24, 2021, https://www.enrich.org/blog/data-shows-strong-link-between-financial-wellness-and-mental-health
But by definition, your job ceases to become your source of income once you retire.
Instead, you’ll need to tap into new forms of cash flow that, most likely, will need to be prepared beforehand.
Here are the most common sources of retirement income. Take note, because they could be critical to your retirement strategy.
Social Security. It’s simple—you pay into social security via your taxes, and you’re entitled to a monthly check from Uncle Sam once you retire. It’s no wonder why it’s the most commonly utilized source of retirement income.
Just know that social security alone may not afford you the retirement lifestyle you desire—the average monthly payment is only $1,543.¹ Fortunately, it’s far from your only option.
Retirement Saving Accounts. These types of accounts might be via your employer or you might have one independently. They are also popular options because they can benefit from the power of compound interest. The assumption is that when you retire, you’ll have grown enough wealth to live on for the rest of your life.
But they aren’t retirement silver bullets. They often are exposed to risk, meaning you can lose money as well as earn it. They also might be subject to different tax scenarios that aren’t necessarily favorable.
If you have a retirement savings account of any kind, meet with a licensed and qualified financial professional. They can evaluate how it fits into your overarching financial strategy.
Businesses and Real Estate. Although they are riskier and more complex, these assets can also be powerful retirement tools.
If you own a business or real estate, it’s possible that they can sustain the income generated by their revenue and rents, respectively, through retirement. Best of all, they may only require minimal upkeep on your part!
Again, starting a business and buying properties for income carry considerable risks. It’s wise to consult with a financial professional and find experienced mentorship before relying on them for retirement cash flow.
Part-time work. Like it or not, some people will have to find opportunities to sustain their lifestyle through retirement. It’s not an ideal solution, but it may be necessary, depending on your financial situation.
You may even discover that post-retirement work becomes an opportunity to pursue other hobbies, passions, or interests. Retirement can be about altering the way you live, not just having less to do.
You can’t prepare for retirement if you don’t know what to prepare for. And that means knowing and understanding your options for creating a sustainable retirement income. If unsure of how you’ll accomplish that feat, sit down with your financial professional. They can help you evaluate your position and create a realistic strategy that can truly prepare you for retirement.
This article is for informational purposes only and is not intended to promote any certain products, plans, or policies that may be available to you. Any examples used in this article are hypothetical. Before enacting a savings or retirement strategy, or purchasing a life insurance policy, seek the advice of a licensed and qualified financial professional, accountant, and/or tax expert to discuss your options.
¹ “How much Social Security will I get?” AARP, https://www.aarp.org/retirement/social-security/questions-answers/how-much-social-security-will-i-get.html
Is racking up credit card debt or taking out payday loans financially dangerous? Of course! But they’re obvious. Hard to miss. They’re like a voice yelling into a megaphone “Hey! Don’t do it!”
But what about money mistakes that aren’t so obvious? Or even worse, money mistakes disguised as money wisdom?
Those may not devastate your bank account in one swoop. But they often go unaddressed. And over time, they add up.
So here are some money mistakes you might not have noticed.
Penny pinching. Sure, it sounds like a great idea in theory. But when you’re constantly scrimping and saving, it’s tough to enjoy life. What’s the point of working so hard if you can’t enjoy a reasonable treat now and then?
Plus, penny pinching may stop you from taking calculated risks that could save your money from stagnation.
So instead of extreme thriftiness, try moderation instead. You may find yourself far more inspired to budget and save than if you commit to complete frugality.
Under or over filling your emergency fund. A lot of people make the mistake of not having an emergency fund at all. It leaves them vulnerable to unexpected expenses and financial emergencies.
But when you have too much money in your emergency fund, it might be tough to make any real progress on your long-term financial goals. A good chunk of your net worth could be sunk into an account that’s not growing.
The solution? Save up 3 to 6 months of income in an easily accessible account, but no more. Use that money to cover emergencies ONLY. If it runs low, refill it.
Once your emergency fund is fully stocked, you can devote the rest of your income to building wealth.
Leaving goals undefined. It’s tough to achieve a goal you don’t have. Do you know where you’ll be financially in 5 years? 10? What are some things you’d like to save towards? A nicer home? An awesome vacation? A comfortable retirement? Not sure?
That uncertainty makes it easy to fudge good financial habits. It’s hard to see how lapses in your overall strategy can impact your big picture because you don’t have one.
So when it comes to your money, be specific. Very specific. Write out your goals and make sure they’re measurable. That way, you can monitor your progress and ensure you’re on the right track.
Be on the lookout for these dangerous money mistakes. They may seem innocuous, but they can add up over time and stop you from reaching your financial goals. Stay vigilant and steer clear of these traps!
It makes sense. Life is hectic. Schedules are full. Sometimes, you feel like you hardly have a second to brush your teeth, much less have time to sit down and enjoy a heart-to-heart conversation with a friend. And so important decisions get pushed further and further into the future.
That’s fine in some cases. Do you need to decide how to organize your garage right now, at this very moment? No, probably not.
But with something like your finances, procrastination can cause disaster. Why? Because time is the secret ingredient for building wealth. The sooner you start saving, the greater your money’s growth potential. Likewise, the sooner you get your debt under control, the more manageable it becomes.
And with your money, the stakes couldn’t be higher. After all, it’s your future prosperity and well-being that could be at risk. Procrastination is downright dangerous.
That urgency, however, doesn’t make it easier to start saving. In fact, you may have noticed that finances suffer more from procrastination than anything else.
There’s a very good reason for that. Procrastination is driven, above all else, by perfectionism. Failing feels awful, especially when you know the stakes are high. Your brain sees the discomfort of trying to master your finances and failing, and decides that it would feel safer to not try at all.
It’s a critical miscalculation. Making an attempt to master your finances can at least help move you closer to your goals. Procrastinating never does.
Think of it like this—50% success is better than 0% success.
The key to beating procrastinating, then, is to conquer the perfectionist mindset and fear of failure. It’s no small feat. Those habits of mind are often deeply ingrained. They won’t vanish overnight. But there are some simple steps you can take, like…
Break big goals down into small steps. This relieves the overwhelm that many feel when facing important tasks. As you knock out those small steps, you’ll feel empowered to keep moving forward.
Don’t go it alone. Procrastination thrives in isolation. Seek out a friend, loved one, or co-worker to help hold you accountable and share the load—even if it’s just a weekly check-in to see how each other are doing.
Work in short, uninterrupted bursts. Set a timer. Put down the phone. Work. After about 15 minutes, you’ll notice something strange happening. Time starts to either speed up or slow down. Distracting thoughts vanish. The lines between you, your focus, and the task at hand start to evaporate. You feel awesome. This is called a flow state, and it’s the key to productivity. Make it your friend, and you’ll probably notice that procrastination becomes rarer and rarer.
Now that you know the cause of procrastination, try these tips for yourself. Set a 30 minute timer. Then, break your finances into tiny action steps like checking your bank account, automating saving, and budgeting. Work on each item in a quick burst until you’ve made some progress. Then, talk to a friend about your results!
Just like that, you’ve made serious headway towards beating procrastination and building wealth. Look at you go!
And best of all (for them), they use YOUR money to make it happen.
Here’s how it works…
You deposit money at a bank. In return, they pay you interest. It’s just above nothing—the average bank account interest rate is currently 0.06%.¹
But your money doesn’t just sit in the vault. The bank takes your money and loans it out in the form of mortgages, auto loans, credit cards, etc..
And make no mistake, they charge far greater interest than they give. The average interest rate for a mortgage is 3.56%.² That’s a 5,833% increase from what they give you for banking with them! And that’s nothing compared to what they charge for credit cards and personal loans.
So it should be no surprise that financial institutions are doing everything they can to convince you to borrow more money than perhaps you can afford.
First, they’re counting on the fact that you never learned how money works. Why? Because if you know something like the Rule of 72, you realize that banks are taking advantage of you. They use your money to build their fortunes and give you almost nothing in return.
Second, they manipulate your insecurities. They show you images and advertisements of bigger houses, faster cars, better vacations. And they strongly imply that if you don’t have these, you’re falling behind. You’re a failure. And you may hear it so much that you start to believe it.
Third, they lock you in a cycle of debt. Those hefty car loan and mortgage payments dry up your cash flow, making it harder to make ends meet. And that forces you to turn to other loans like credit cards. It’s just a matter of time before you’re spending all your money servicing debt rather than saving for the future.
So if you feel stuck or burdened by your debt, show yourself some grace. Chances are you’ve been groomed into this position by an industry that sees you as a source of income, not a human.
And take heart. Countless people have stuck it to the financial industry and achieved debt freedom. It just takes a willingness to learn and the courage to change your habits.
¹ “What is the average interest rate for savings accounts?” Matthew Goldberg, Bankrate, Feb 3, 2022 https://www.bankrate.com/banking/savings/average-savings-interest-rates/#:~:text=The%20national%20average%20interest%20rate,higher%20than%20the%20national%20average.
² “Mortgage rates hit 22-month high — here’s how you can get a low rate,” Brett Holzhauer, CNBC Select, Jan 24 2022, https://www.cnbc.com/select/mortgage-rates-hit-high-how-to-lock-a-low-rate/
It’s a common mindset, and it keeps many from reaching their financial goals. But the truth is, you don’t have to be born into money or have some special talent to create wealth. It all comes down to making a commitment to start building your fortune today.
So why do so many people put off working to create wealth until later in life? There are many reasons, but chief among them is fear.
What if you save your money in the wrong place and lose everything?
What if you can’t access money when you need it?
What if you confirm a deep-seated suspicion that you don’t really know what you’re doing?
But here’s the truth—you’re better positioned to start building wealth today than you ever will be again. That’s because your money has more time to grow and compound today than it will in the future.
That’s especially true in your 20’s and 30’s. But it’s also true if you’re 45 or 55. The best time to build wealth is right now, this very moment.
So what can you do? How can you leverage time to start building wealth? Here are a few simple financial concepts you can use right away.
Create an emergency fund. I know it seems counterintuitive, especially if your credit is in shambles or you have a lot of debt to pay off. But the truth is, building an emergency fund is one of the best ways to begin building wealth because it gives you a margin of safety. If you have money set aside for a rainy day, you won’t have to turn to credit cards or high interest loans when life throws you a curveball. Instead, you can take care of things with your own savings and move on.
Automate saving right now. The best way to start building wealth is to put something away every month. Forget about how much you’re putting away or your interest rate. For now, just put something away, even if it’s just $5. You can work with a financial professional to boost those numbers later on. The important thing is to start now.
If you want to learn more about how to start building wealth today, let’s chat. I’d love to help you set some goals and create a plan for getting there. We all deserve financial security, regardless of our age or income level. So let’s find out how you can get started today.
Whether you’re in your 20’s and paying off student loans or in your 40’s and trying to save for retirement, financial decisions can be complicated.
The good news? There are steps you can take to avoid mistakes and help your peace of mind when it comes to money management. Here are some of the most common financial blunders people make, and tips on how to avoid them.
Caring too much about what others think. This may be the tough love you need to hear. No one judges what you drive. Or the watch on your wrist. Or the size of your home. And the one-in-a-million person who does? They’re probably someone with WAY bigger problems than your 2006 economy car that still gets great gas mileage.
But that fear is powerful for a reason. It’s been carefully nurtured by TV commercials and Instagram accounts with a singular goal—to make you buy things you don’t really need.
Know this—you’ll gain far more respect by attending to your own financial situation than by desperately trying to keep up appearances.
Not asking for help when you need it. Let’s face it—mastering your finances is symbolic of becoming an adult. You’re supposed to know how to run a budget, save for retirement, and somehow have enough left over for a nice summer vacation. There’s tremendous internal pressure to act like you know what you’re doing.
But were you ever taught how money works? Did any teacher, professor, or mentor sit you down and explain the Rule of 72, the Power of Compound Interest, or the Time Value of Money? If you’re like most, the answer is no. It’s a cruel double-bind—to feel good about yourself, you must master skills no one has ever taught you.
This keeps you from asking for help. You get caught in shame, denial, and confusion. It’s hard to admit that you don’t know something that seems so basic, so essential.
But rest assured—you’re not the only one. And the right mentor or financial professional will listen to your story without judgment and seek to help you.
Procrastination. There are few things more daunting than staring at a pile of bills, an empty bank account, or an intimidating stack of paperwork. You know what you have to do. But it doesn’t happen because you’re so overwhelmed by the task ahead. And it’s especially daunting if you’ve never been taught how money works—you don’t even know where to start!
But nothing causes financial pain quite like procrastination. That’s because it causes exponential damage. Your bills pile up. Your interest rates rise. Your savings fall drastically behind, and you must save far more to catch up.
The antidote? Break tasks down into smaller, manageable steps. Maybe that means signing up for an online budget app or working with a financial professional. It might mean automating $15 per month into an emergency fund, or cooking one dinner at home each week.
It doesn’t matter how small the task is, as long as it helps put money back in your pocket and stops the scourge of procrastination.
In conclusion, making financial mistakes is something that can happen to anyone. By knowing some of the most common financial mistakes people make and what you can do to avoid them, you’ll probably have more peace of mind when it comes to money management.
If you want to maintain a budget and save money, then you need a plan. The first step is understanding the basics—what is a budget? How does it work? What are the benefits of having one?
To effectively manage your monthly budget, you must take certain steps from day one. This article will provide some helpful tips and tricks on how to get started and keep going strong until payday rolls around!
What is a budget?
A budget is a plan. It helps you set limits for your spending, so that you can track your income and expenses. Maintaining a budget keeps you aware of when you are spending too much or if there are areas where your money could be saved.
It can also help you understand your spending habits as well as identify problems, such as giving in to too many sales or buying expensive lattes every day. With a clear understanding of how you spend money every month, you may be able to reduce expenses and even start saving for luxuries or emergencies. You can’t have a goal of saving for your next summer vacation if you don’t know how much money you’re spending now.
How to create your budget
The first step is to set goals for yourself for income and spending. When it comes to income, you need to consider all the ways you get paid. What is your salary—after taxes and any other contributions you make, like to a 401(k)? Is your employer cutting back your hours? Do you have another source of income such as a side job or freelance work?
Be completely honest with yourself about how much money you have coming in. Once this figure is known, you can assess your spending and determine how much of your income goes towards them every month.
Next, make a list of all fixed monthly bills, such as rent or loan repayments. Then make a list of variable expenses, such as groceries or gas. Lastly, make a list of all your monthly discretionary spending, or ‘fun money’.
If you struggle with this last step, look at your bank statements. It’s the easiest way to find a complete record of your spending. This will help you pinpoint the areas that you could cut down on or even eliminate.
Leverage your budget
Now that you have your budget, you can take action. You can save money by leveraging your budget to meet your monthly goals.
The first way is to leverage your income. If you have a job, talk to your employer about working extra hours, or ask for a raise. This will give you more money right out of the gate.
Beyond the extra income from a job, there are many other ways to add to your budget.
You can start small and pick up some side work—babysitting, dog walking, delivering pizzas, etc. If you can turn your free time into money, go for it! This all depends on your financial situation and what you feel comfortable with, so take the time to plan accordingly.
You can also think about reducing your expenses. Cutting back on luxury items can save money every month without having to work an extra job. Just think of all the things you could do with the money that’s currently going towards cable TV or eating out every day for lunch!
Don’t forget to have some fun every once in a while. Just find creative ways to have it on a budget. Plan more outings with friends like playing tennis or frisbee in the park, rather than going to the club every evening. Your community is bound to have some free local events going on, especially in warmer weather.
A budget is a way for you to track your expenses and income each month. You can leverage your budget in a number of ways, by increasing income or decreasing expenses—or both! With this knowledge, you’ll be able to save more and plan for the future.