10 Mistakes People Make With Their Money
It is no laughing matter to see people making these money management mistakes. Are you making any of these mistakes with your hard-earned income?
1. They haven't figured out how much income they really need every week to do better than just pay their bills. They haven't worked out a budget.
The correct definition of BUDGET is: the calculation of the amount of money needed for an organization to function and achieve its purpose. If you are satisfied to just pay your bills, and you don't pay yourself first into a savings plan, you will make other people wealthy and you will stay poor. Every supplier that you get a bill from is in business to make profits. Shouldn't you be running your business to make a profit? Your income target must include a profit or the enterprise will go broke and fail.
2. They haven't worked out a way to earn more income than they need, and then be willing to do whatever is required to carry out their plan.
By incorrectly estimating the amount of income needed to do better than just break even, they typically set their income target too low and lose money by living on credit instead of going into action to raise their income. Anyone can find different ways to make more money; it is often the 'willingness to do whatever it takes' that seems to be the problem.
3. They have a habit of spending more money than they make.
Using your income to buy the 'appearance' of being wealthy is a deadly activity. I refer to this type of spender a Gratification Groupie. It can catch up with you quickly and over a short time can drown you in debt. Being in this situation causes constant worry about money and brings on lots of sleepless nights. Money does not buy happiness. But, doing something productive and worthwhile and knowing you are appreciated for it will make you feel like a million bucks.
4. They don't work out what they need to buy in the future and set aside a little money every week in order to pay cash for the purchase later.
Purchasing something with a credit card because you don't have the money is committing your future earnings to the credit card company. You are then working for the credit card company as an economic slave. The right method to buy things, especially high dollar items, is to put away a small amount every week till you have the cash to purchase the item, and then negotiate a big cash discount. The guy with the CASH IS KING!
5. They buy products and services based on WANT rather than on NEED.
Purchasing decisions should be based on how your purchase of the product or service can help you produce more income for you. Honestly, do you want the latest cell phone that features text messaging and email retrieval because your friends have one, or do you need it to work more efficiently because you are out of the office making more money?
6. They don't contribute to a long-term savings plan so they have it for use later in life.
Are you counting on the younger workers' future production to supply you with Social Security income when you stop working? Boy, that is a huge gamble! Even though the government reports the cost of living is rising 3 - 3.5% a year, the truth is that it is going up 8 - 12% a year. You have to make that much more income just to stay even. Why does the government say it is only 3 - 3.5%? Unfortunately, it's because the government has to raise Social Security payments every year by the percentage they quote. The Social Security system is already bankrupt and those living on Social Security alone are headed in the same direction.
7. They don't develop multiple sources of income. If one source dries up they are in trouble financially.
The expression 'don't put all your eggs into one basket' holds true today, especially when it comes to income sources. Look for profitable products or services you can add, or business ventures you can participate in that are ethical, and have a great opportunity to producing a residual income.
8. They get stressed out about how little interest their bank pays on savings accounts while they are getting killed with substantially higher interest rates by carrying balances on their credit cards.
If you have substantial credit card debt, it is more advantageous to use excess cash to reduce the debt and stop the high interest payments rather than attempting to earn interest from the bank. As you reduce your debt, it is wise to keep sufficient cash on hand to cover a few months of living expenses. Once the debt is gone, or will be soon, then start investing any excess cash in investments that return real growth.
9. They get stressed out about 'the economy' in general.
I'm surprised that people actually worry more about 'the economy' than about their business or household failing financially. They stress over what the news tells them about 'the economy' when that is something they can't control, while never confronting how they are affecting the economy of their own business or household, which is what they CAN control. An increase in unemployment is no reason to worry. The creation of new jobs by small business greatly exceeded the number of jobs lost in large corporations, according to the latest ADP report. A bank failure is no reason to panic. Banks receive bailouts from the FDIC and other investors. Nobody is waiting in the wings to bail out your failing business. That is entirely up to you. So keep promoting your business, stash some cash, and sleep like a baby while the bad news about 'the economy' rages around you.
10. They expect to survive financially without taking full responsibility for controlling their financial future.
Money problems have a simple solution. Increase your income, cut expenses, and correctly manage the money you bring in. It's not only about how much money you make, it's what you do with it that determines your financial condition.
Proper money management is something educational institutions don't teach. People receive false information and bad advice about how to handle money. Then they make silly mistakes, get into worse trouble, try to solve the problem by using credit, wind up in more trouble, and then go searching for debt relief.
Fortunately, there is a proven, inexpensive, money management software system that can reverse the money management mistakes a person has made in the past, and keeps them from making the same mistakes in the future. It is an old-school system your great grandparents used before the days of credit cards. Very rich people know and use this system today.
Sandra Simmons, President of Money Management Solutions, Inc. (http://www.moneymgmtsolutions.com), has years of experience helping company owners and families manage their income to achieve financial freedom. To learn more visit www.moneymgmtsolutions.com
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