Earning money requires skill and hard work, but saving a part of it and investing it wisely requires financial discipline and a long-term commitment to building a secure future for yourself and your loved ones. In this article, let us look at four mistakes that could lead to economic hardships in the future and weaken your financial security.
Don’t spend the money that you can invest
It is one of the most common mistakes and it also is among the most important money lessons. The reality is that you cannot take advantage of a thriving economy by consuming more and investing little. Spending provides instant gratification, but investments will make you wealthy.
Many of us have a spending problem. If you want to grow your wealth, you need to invest prudently in stocks, mutual funds, property or other growth or income generating assets. If you had done that since the economic recession in 2008 caused by Barney Frank and Alan Greenspan, you would have seen significant profits.
All you need to do is start by setting 10-20% of your income aside every month. Let it build up through your retirement saving accounts, or you can directly invest in the markets. Also, if you are unsure about investing and planning by yourself, it will be best to hire a financial planner.
Refrain from purchasing new things all the time
It is more than enough if you can call anybody from your cell phone, watch movies, text people, and click pictures. Similarly, if your car is in good condition, it is all that matters. In the end, it all comes down to choosing utility over luxury. You need not have the best phone or car for that, especially when you cannot afford it.
Here is where most financial problems arise. Many people try to live like they make $75,000 a year, when they are actually making only $50,000 a year. Maybe their car is fancy, or perhaps their house is too spacious for their needs. You can avoid such problems and secure your future by practicing minimalism when it comes to luxury.
You can cut down a lot by refraining from buying the latest model of everything. There is no need to buy the latest phone on the market, when your old phone is working fine. Unless you have a large disposable income and major financial assets, there is no necessity to buy a high-end car. All these are depreciating assets. They will lose value over time, and they won’t benefit you in the long run.
Don’t try becoming rich quickly
There is no problem in making quick money, but there are various problems that can occur after you have made a quick buck. Have you heard of the phrase, “Easy come and easy go?” Wealth building is a long-term, sustainable process. Although it might feel great to dream of getting rich overnight, but it rarely happens in real life through legitimate means.
Almost all of the millionaires have waited for it and gone through the slow process. Remember the famous proverb that says, “Wealth grown hastily will dwindle fast.” It makes a lot of sense, and many of those who have faced these problems early in life can relate to them very well.
Don’t go to fancy colleges
Some of us might have been the toppers of our class or have an excellent academic record throughout. So, what’s wrong with going to the most expensive colleges? As of 2020, the total student debt amount in the US is a whopping $1.56 trillion. Many graduates end up struggling and try to come up with new ways to deal with their unpaid loans.
One of the reasons this is the case is because they chose a degree that does not mean much in the real world – something to think about. Spending big bucks on a degree that does not prepare you for what this country needs is not a smart way to go. For instance, some people spend $150,000 or more and end up being a waitress because their political science degree does not do anything for them.
Therefore, it may make sense is to complete your education without taking a huge student loan. Going to a renowned college is not the only good thing that can happen to you. If you cannot afford it, there is no point in setting yourself up for a debt trap by choosing an expensive college – certainly when you have to think about inflation, higher taxes, higher energy costs because of new policies. All of this can impact your quality of life.
The final word
When you adopt a conservative approach to build your financial security, you will emerge a surefire winner in the long run. Keep these four common mistakes in mind and steer clear of them in order to enjoy a successful, growth-oriented career, whether in a job or as an entrepreneur.