5 Money Mistakes Most People Make: Hindsight is 2020
We have all heard of the saying hindsight is 2020 and I hate that saying only because it’s so true.
In all areas of my life I can think of different decisions I would’ve made if I would’ve known then what I know now, like the 5 money mistakes that I am going to cover today. I would have started investing a lot sooner. I would have taken that job as a linguist because 20 years later, I’m still in the military.
When I first signed up for the military, I signed up to be a linguist. I always wanted to be one of those people that knew like five languages. They just seemed so exotic to me growing up! But when I went to sign the contract they told me I was signing a five-year contract because linguist school was a year long. This was different from what my recruiter had told me; he said I only had to do four years.
In my young 18-year-old mind, I was only doing four years. I had plans: I was going to do my four years and then I was going to go conquer the world. I ended up choosing a different job as a communication specialist, which was a 5-month school and signing a 4 year contract. Like I said, 20 years later and I’m still in. Nevertheless, I believe that all things work out for the good and end up the way they are supposed to. If I had taken the job as a linguist, I would’ve never met my husband, and I wouldn’t have my handsome boys today.
Here’s the thing though. Even though we know that there’s so much advise we didn’t take in the past, how much good advice are we hearing that make sense and is sound but that we are still not following! Things like eat healthy and exercise and keep your mind fresh and active by learning something new everyday.
I had heard of these 5 money mistakes in my 20s but I didn’t really start taking them seriously until my early thirties. How much further along would I be if I had learned from other people’s money mistakes sooner? Most of us are so hardheaded that we don’t take sound advice! I hope that when you read my 5 financial mistakes to avoid, you will heed to sound advice.
#5 Living Above Your Means
You know that popular saying from a few years ago? YOLO, you only live once. That’s a catchy saying but that kind of thinking can really get you in trouble; especially in your finances. YOLO type of thinking has people out here buying things they can’t afford, things they know they have no business buying. If you don’t have red bottom shoes or Yeezy money, don’t spend your entire paycheck on those things. You know if you can afford to be traveling first class, eating at 5 star restaurants, and having a $3,000 mortgage; and just because you can afford it, that doesn’t mean you have to.
I got some good advice about six years ago: whenever you get a promotion, take that extra money, and transfer it into a savings account. Let that money just continue to pile up. You were making it work before with the amount you were getting so keep making it work with that same amount. Don’t start spending more because you’re getting paid more. You don’t have to impress anyone! You don’t need to buy new clothes every time you go on vacation or every time there is a special occasion. Nobody’s paying attention to you or me like that; and even if they are, that’s their problem not yours.
Here’s a saying that Emmitt Smith learned from Cowboys owner Jerry Jones. First, let me just say that as an Eagles fan it hurts me to even have the name of that team on my website, but it’s some good advice: Have a big front door and a small back door. Take in as much as you can, and spend as little as you can.” That’s some good advice.
#4 Not Having a Financial Plan
I get it, if you don’t look at your finances, you can just keep pretending everything is fine. It’s like me when I eat at restaurants. I know that some shady stuff goes on back there in the kitchen but as long as I don’t know and the food tastes good, I’m ok with it.
I had someone call me a few weeks ago to tell me he was working on his 50-30-20 budget after watching my video. Up until that point he would rather not know but I guess something clicked while watching my videos. He was getting frustrated though because it wasn’t something he’s used to doing. We stayed on the phone and in less than an hour, he had a budget, had a plan to reduce his wants spending and save $200 a month. He was actually in a better position than what he thought and that day he started to take control of his finances.
See, not knowing your financial state is only going to put you further and further behind. You need to take that first step, and see where your finances are, so you can have a starting point. Then and only then can you come up with a plan on how to fix your finances. The time is now, and the how is websites and YouTube channels like mine that teach financial education. Things aren’t going get any better the longer you put them off.
#3 Having No Emergency Fund
My friends, emergency fund, emergency fund, emergency fund! The biggest names in financial education preach emergency fund: Dave Ramsey, Suze Orman, Ana G (well I’m not big yet but I’m putting it out there to the universe!). Don’t plan to fail by not having a plan.
Having an emergency fund keeps your stress level down and saves you money. You will have peace because you know that when something unexpected happens and it will, that’s life, right? It’s not going to be one more thing you need to worry about. If you don’t have an emergency fund, you’ll probably be taking out a loan or using credit cards which cost you even more money in fees and interests.
I have a blog and a video on Building an Emergency Fund if you need more help on this.
#2 Not Paying Yourself First
If you have read some of my previous blogs, you know how passionate I am about this. You’re putting in the work and the hours and for what? For all your money to go into liabilities like Mr. Mort Gage and Mrs. Car Note? Things that are only costing you money.
No! You take a certain percentage of your income, I recommend 20% and you put that money aside to put into an asset. Every single thing that you spend money on can be put into two categories: it’s either an asset or a liability.
A liability is something that will only keep costing you money; a car is a liability. It will only depreciate in value the minute you drive off the lot and cost you money in repairs and gas. The only way I can think a car would be considered an asset is if you’re an Uber or Lyft driver. Most people spend most of their money on liabilities: cars, electronics, shoes, clothing, and furniture.
On the other hand are assets, those things that can make you money. Assets include things like stocks, bonds, retirement accounts, mutual funds, gold, silver, cryptocurrency, a business; whether it’s starting a business or investing in one, and rental properties.
So to make a long story longer, an asset is something that puts money in your pocket; a liability is something that takes money out of your pocket! Now, don’t get me wrong, I’m not saying that you shouldn’t buy liabilities, but what I am saying is that you should start thinking about the things you are spending your money on. We want to pay ourselves first and invest in assets. So next time you are going to make a big purchase ask yourself is this an asset or a liability? Cause Ana G says I should be working on buying more assets!
#1 Not Having a Budget
Financial mistake number one to avoid is not having a budget. How many times will I bring up budget on my website? There’s no way around this! A budget will help you avoid every financial mistake on today’s list.
You won’t live above your means because you are only spending the leftover money on wants AFTER saving and paying your necessary expenses. You’ll have a financial plan or at least part of a financial plan, because your budget helps you plan your money accordingly. You’ll be working on your emergency fund and paying yourself first because these two things will also be part of your budget.
A budget is step number one and because my channel is not only about providing financial education but providing PRACTICAL financial education, I have a video on my channel 5 Easy Steps to Creating a 50-30-20 Budget.
Avoiding these financial mistakes will help you get further along on your financial journey much quicker. Learn from the mistakes of others and exercise the wise money advise you have heard. Remember, smart people learn from their mistakes, wise people learn from the mistakes of others. Are there any financial mistakes that you would have added to the list? Make sure you come back next week for part 2 of financial mistakes to avoid and see if they make it on my list.
To Your Finances,