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9 Major Money Fails and How To Correct Them
Money is a finite resource in our lives, yet we treat it as though it is gifted upon us by Fairies. It takes hard work, dedication, and skill to earn money, but we are still making these mistakes every day. These money fails are easily correctable, and we will give you the necessary steps to get there.
Here are 9 major Money Fails that can be avoided or corrected.
Not Automatically Saving Money
We receive our paycheck and it’s off to the races! Time to pay utility bills, catch up credit card payments, pay the rent, pay the car payment, and then we still need to have fun!
How much did you put into your savings account?
How much did you invest?
The answer to those questions will probably shock you if you aren’t automatically socking away your funds.
We get behind in our daily lives, and behind in our bills, and it seems as though the next paycheck can’t come soon enough.
What if you saved 20% of your income, not including your 401(k)? That money would be there for any emergencies you may have, but would also allow you to breathe freely.
The biggest advantage we have seen to saving, is looking at our accounts with no fear.
The stress of living check to check isn’t there anymore.
If you enact a system of saving automatically, before you ever see it hit your account, it will grow until you have a large fund for emergencies and peace of mind.
Americans in general are not good at saving, but that is not an excuse. We have to plan accordingly and take the fear out of finances.
High Interest Credit Card Debt
You were told somewhere around age 18 that you needed a credit card to start building your credit.
So what did we all do? Run to Best Buy, or Target, or even Wal-Mart, and sign up for a super high interest card and start spending.
Raise your hand if you still have that card today. Keep your hand raised if that card is near it’s credit limit.
We messed up.
Telling kids to get credit cards is not sound financial advice, then to compound that bad advice, we don’t teach them how the cards work or how to use them properly.
The store credit card system is mostly a scam and a way for retailers to maximize not only their bottom line per customer, but to keep you loyal.
These cards average 23% or more in interest, but try to entice you with 5% discounts or some other measly incentive.
What a bargain!!
They have you on the hook by shopping at their store, with their card, and a ridiculous amount of interest.
Make sure you pay that card off in a reasonable time frame and never look back.
It doesn’t just apply to store credit cards, it also applies to major bank credit cards. Chase, Capital One, Bank of America, they all have their own credit cards on offer that they encourage everyone to apply for.
The problem lies with those of us with little or no credit, or even bad credit. These cards will start at 18% and go up from there, also with measly incentives.
They give their best offers to those with great credit and then incentivize those folks to the hilt. This includes 0% interest for long periods, 5% cash back or more, and points on purchases.
How do we fix this?
Hopefully, you never get into debt. We have and it’s a major hurdle to our happiness.
Focus on paying off your highest interest card or cards first.
Then roll that payment into the next card.
Avoid signing up for any new credit cards and use credit very sparingly.
For those of you wondering what to do to start building your credit?
Go to your local credit union and open a savings account. Deposit $100 and after a few weeks come back and ask for a personal loan of, you guessed it, $100. Take a couple months to pay this amount back using the money in your savings account.
Build this relationship slowly and always have the money in the savings account.
This builds your credit and never gets you in over your head.
Not Getting Your Employers Full 401(k) Match
A lot of companies these days will automatically enroll their employees into the 401(k) plan, but not at the full employer match.
If you honestly can’t tell us right now what percentage of your income is being put into your 401(k), then this section is for you.
Most employers will offer a match on the funds that you put into your 401(k) account.
For example they may match 50% of the funds you deposit up to 6%. This means that they give you a free 3% added on to your 6%. You are officially getting FREE money.
Are you getting this full match from your employer?
Go look, we’ll wait.
When they set up your account initially, they may have set it to 3% and you are receiving a 1.5% match.
Think about how much money you missed out on! You were putting 4.5% including match into your account, and that could have been 9%!
Not to make you feel worse, but the stock market has been on a tear these past couple years, just sayin’.
So first chance you get, march in there and tell them to change your withholding percentage to take advantage of the full match.
This is a huge mistake that has to be corrected sooner than later, we never want to miss out on all the compounding that happens over time.
Waiting Too Long to Invest
Welp. You just hit age 30 and you haven’t started investing yet. Might as well give up and just blow it all on a BMW right?
It’s never too late.
Compounding and time are your best friends, and the more you put away today, the more exponentially large the funds will be when you are ready to withdraw.
It’s not just about retirement either. Saving for home starts now too. Any large purchase that is more than a year or two away, you should be investing money like a madperson.
The more time your money has to grow, the more you will have working in your favor.
When we say invest, we don’t mean in a savings account. You need an honest to goodness investment account that invests in something that will get you a good return.
Whether that is the Stock Market, Bonds, Real Estate, or even your cousin’s “business”, you need to invest in something that has a track record of producing returns and that you can reasonably assume your money will grow over time.
That leaves out your cousin’s “business”.
The key to this mistake is that we put things off because we either don’t have experience or aren’t comfortable with it.
Get comfortable with the concepts, and start investing. Today.
Go, we weren’t kidding!
Taking on Large Expenses
You saw this commercial the other day that set your heart ablaze! The beautiful leather interior, and almost full length sunroof, touch screen in the dash, and every amenity that could imagine, for the low low price of….
Stop right there.
Our hearts are not in control in any longer. We have to be strong in the face of these ads.
Let’s look at this another way.
Obviously we are talking about a car ad, and they entice you with all the features and benefits that owning a new car brings.
Luckily, almost any car “brings” what it supposed to bring, your ass from point A to point B. That is all a car is supposed to do.
While I don’t deny that cars can instill passion in us from time to time, the real question is how far in debt are you willing to go to get from point A to point B?
How much comfort is enough?
How much time will you spend poking that touchscreen(and the one you bought that is at home)?
Debt is the enemy of wealth, and large purchases like a car will keep you from ever getting where you want to be.
That $400 a month would turn into $500,000 if invested long term. That $400 a month would make for a very comfortable savings.
Pulling out the checkbook(damn we’re old) and writing a check that large just for an appliance that gets us from point B to point A(fooled ya) is pain inducing.
It will feel great for one month or two, but by month 6 you’ll see the next new thing and your heart will be all ablaze again.
Save your money, and make a conscious effort to buy within your means. Buy what you can afford in cash.
Don’t look at me like that. Imagine a world with no car payments. Imagine a car out front that is 100% yours. Make this world a reality.
Ultimately, don’t listen to the heart in this one, let your mind take over and get the sensible appliance.
Not Taking Risks
You looked at the title of this section and gawked for a moment, didn’t you? “You are telling me to take risks?” WTF!
Of course we are, we don’t get anywhere in life without risks. Even getting into our driving appliance is a risk and we do that everyday.
Investing has some measure of risk too.
Life is full of risks, but if we want to be more than we are now, and if we want to fix this mistake, we have to take more risks.
You have to take more risks.
Start a business. Create art. Create passive income streams. Start a YouTube channel.
All of these have some amount of risk, but if we wait for the safest course of action in everything, we’ll never go anywhere.
We’ll never get to where we want to go.
We aren’t saying that you have to take risks with money or just in financial fields. The art example is a risk, because you are afraid of what others will think.
You are afraid of putting yourself out there.
The same can be said of the business world. If we don’t risk something, we’ll never have anything.
We don’t mean to be too broad on this topic, it’s just that we all have different levels of risk tolerance.
Just know that you need some risk to get some reward.
Find your passion and take a chance at it, and if you’ve corrected all the other money fails in your life, then you should be ready to go on this adventure!
Buying Depreciating Assets
Consumerism is a large part of American culture, and it’s taught us to buy things just because.
Let me explain. We collect things, and buy multiples of things, and then we buy things just to have them.
These are items that depreciate as soon as we leave the store with them.
Video Games depreciate.
You get the point. We buy things for entertainment or for collecting purposes alone. A study recently stated that experiences are better for you and will be remembered longer than buying stuff.
We even have a post on how this affects your mind.
We buy things because we can, or because we feel we need them. However, if you take a step back and give yourself a good cool down period, maybe 3 days, and see if you still want said item.
Money is a tool that allows us to have the most valuable thing on Earth, time.
The more money you have, the more time you can spend doing exactly what you want to be doing.
So take a moment before buying anything and question whether it will make your life better or if it will get you closer to having your own time back.
Chances are, most of the stuff we buy won’t.
Not Budgeting Properly
We don’t have a budget written down. To be fair, AM and I don’t even keep our money together, but we have sat down and cut expenses in every area of our life that we could.
This means that we have looked at what comes in and goes out, then made swift immediate cuts to the flabby parts of our lives.
Too many subscription services, too many small purchases while out and about, and too many wasted dollars on things we didn’t need(see above).
Do you have these things dragging on your account every month?
The only way to know for sure is to fully track an entire month. Every single dollar.
That way you know what is going on and you can attack any problem areas.
We won’t tell you exactly what to cut, but you know if it’s something that doesn’t keep you productive, it’s a good place to start.
Budgeting is a very personal thing and we can’t tell you how to handle yours. The majority of relationship fights originate from finances, so it’s important that your partner is on board at all times.
Show them this article and work out a plan. Look at the comings and goings of the cash. Make strong decisions and stick to them.
Some folks need a pen and paper budget and there are even very good digital ones(here).
Whatever you decide, do it this month. We found that we were wasting almost $375 per month on things that we didn’t even use or watch.
Do you know how much savings that could have been?!?
As with anything in life consistency is the key. Just because you cut a lot of stuff this month, doesn’t mean that you won’t add things next month.
Be thoughtful and purposeful in what you decide to buy, and think about how hard those dollars were to come by and how many risks it took to get them.
Make your budget a part of your life, it will allow you to live with a lot less stress.
Eating Out Too Much
You are looking at me and shaking your head. “I already know this!” But do you still fall victim to it?
How many meals did you eat out this week? We had 2 meals out for the entire week. One of those was paid for by AM’s Father(score!).
We propose that you don’t eat out more than once per week.
That includes breakfast, lunch, and dinner my friends. And snacks. And convenience store runs.
You’d be surprised how often we as a society eat out. There are more restaurant choices than ever because people are showing up and eating there.
Our waistlines are showing it too!
If we make smarter, healthier choices and plan our meals ahead, we can make a positive difference in our health and our wealth.
That doesn’t mean stock up your cabinets with snacks and junk food.
It means plan good home cooked meals for the week, and prepare them so that they are easy to take with you for lunches, or easy to heat up when you’re in a hurry.
Buy a week’s worth of groceries at a time. We waste so much food by letting it sit waiting to be consumed. Buy with purpose, and buy food knowing you will use it. Don’t buy food “just in case”.
The cost of one meal eaten away from home versus one good home cooked meal, can be up to 10 times as expensive.
Don’t let the restaurant owners get the upper hand and all your dollars.
You’ll feel better and look better if you fix this money fail.
Money Fails Turn Into Victories
All of these money fails can be corrected and get you back on the path to wealth. Just don’t try to correct them overnight.
As with any habit, it takes time to break the old one, and time to create the new one.
Be strong and consistent with how you approach fixing your money fails.
We know not all of these will apply to you, but take what does apply and use it to help get your finances in order.
Let us know if you’ve fallen victim to any of these and what you plan to do to fix it. We are inspired by hearing your stories as much as you’re inspired by reading ours.