In this day and age, getting ahead financially is truly an uphill battle — especially when you are making critical money mistakes. Luckily, these mistakes didn’t stop me in my journey to better financial days but here are some warning signs you may be managing your money in less than ideal ways.
Number 1: You pay yourself last
The simple act of paying yourself first is among the most certified financial advice ever given. After all, you did the work, so why should you de-prioritize yourself by paying yourself last? This concept is a significant pillar in personal finance; and many financial experts consider “paying yourself first” a golden money management. Now, maybe you’ve heard this advice before or were bestowed this wisdom from your parents. If this is the case then you’ve been fortunate to date but if this is news to you or you’ve neglected to employ this money management strategy then this is likely contributing to your financial demise.
At the core, paying yourself first just means that you’re taking care of building your savings and investments before you start passing off your cash to others. This money should be saved or invested before you spend money on a new TV, settle your kid’s allowance, buy groceries or even pay your utility bills.
It cannot be overstated that you should make sure there’s always a portion of your earnings going into savings. When people normally get paid, their first priority is paying their bills or spending to appease themselves. Then, after these items are crossed of the list, whatever scraps are left and sent into savings and as you can imagine, most of the time this amount is minimal.
For many people, it may be easier to implement the notion of paying yourself first by setting yourself as your most important creditor every month. You can begin with tiny amounts such as $100 every payday. You can also utilize automatic payroll deductions to automate this process. By employing this approach, you don’t have to think about how much to save or even risk being tempted to spend that money given that the whole process is automated. In fact, if you ask me, sometimes being lazy, by automating that is, can be one of the best ways to get ahead financially.
Now, there are a lot of benefits when choosing to pay yourself first. First is the obvious aspect of seeing your bank balance rise over time. This means that when emergencies arise, you have the money to tackle your issues head on rather than having to rely on costly debts to extinguish the matter. Moreover, paying yourself first also comes with a lot of mental benefits. Once you start paying yourself first, you will feel as if you are working not only to pay bills but to also see your own wealth rise over time and this can be a great way to feel financially empowered, which quite frankly is a feeling most people never experience.
Number 2: You spend your time with people who aren’t excelling financially
From what I’ve seen, the wealthy among us understand how critical it is to surround themselves with men and women of the same caliber. You’ll be doing yourself a lot of good if you set aside some of your time to network and meet successful and wealthy people. Make it your aim to fill your circle with people who have talent, drive, and, most of all, the potential to attain success. Wealthy people set aside time specifically for meeting other like-minded individuals. So where can you go to expand your circle of influence? Well, seminars or conferences are a great start and if you’re more digitally inclined you may find it beneficial to connect over platforms like LinkedIn.
Now, if you ask me, one major factor holding people back is that most of them do not see the importance of keeping their circle filled with people going places in life. They keep friends who are like them. People who make them feel comfortable in their poverty. They may make claims to detest poverty, but their actions speak otherwise. It’s a universal and straightforward law, really; if you want to be rich, do what the rich do. But how do you know what the rich do if you don’t keep them around? In short, you don’t and your financial success, or lack of it will reflect this.
Now, maybe deep down, poor people don’t want to be rich and this is why they shy away from surrounding themselves with wealthy individuals. This could be because of several beliefs, ideologies, and myths surrounding wealthy people. For example, some people believe that the love of money is the root of all evil, hence subconsciously, they hate money, thereby disliking the rich who have it. On the other hand, the habit of surrounding yourself with fellow broke people might not be that deep. Maybe it’s just ignorance. An inability to understand that if you surround yourself with broke people, they give you “broke energy”. However, if your circle is filled with rich people, they offer you “rich energy”.
Any time you spend networking with wealthy people is time wisely invested. This is because such occasions will keep your mind focused on success. This way, you meet people who are either where you want to be or are at least going there. Another good thing about surrounding yourself with wealthy people is that you’ll meet new people with thought-provoking and fresh ideas. Last but not least, doing this will help you fill your contact list with influential and relevant people who have the potential to be that bridge between where you are right now financially and where you want to end up!
Number 3: You have no problem taking on more debt
When it comes to debt, there are bad debts and there are good debts, but regardless of the type of debt, if you have no problem taking on more debt, you‘re setting yourself up for some rough financial times ahead.
At no point in your financial life should you delight in getting deeper into debt, especially when that debt is in the form of high-interest debt. No matter the advantages you might be getting from the debt you’re taking on, be it tax deductions or tax breaks, these owings will still weight on your financially, even if they are deployed in the most economic of ways. At the end of the day, debt is a subtractor from your net worth, and as such for the average person, there’s no wisdom in seeking to increase it.
Now we just talked about how taking on more debt can weigh on you financially and how it can lead to hefty interest charges but the list of issues with debt continues. One significant and apparent reason not to constantly borrow is that it will reflect on your credit score.
Exactly 30% of your credit score is based on the debt you owe. The more debt you accumulate, the more it affects your credit limits, loan balances and ultimately results in a lower credit score. Regardless of whether you’re interested in getting a loan or a credit card, keeping a healthy credit score will help your financial life down the line. Things like your auto insurance premiums will be negatively impacted if you develop the habit of taking on more debt and having a low credit score can also affect your ability to gain employment or even tenancy. Hence your broke days and constant struggle will know no end if you don’t get your debt under control.
Number 4: You prioritize saving and neglect investing
In this world, people use people — it’s sad but it’s true. However, the rich go one step further using their money too which most others often fail to do. Most people never figure out how to make their money work for them, so they only prioritize saving and neglect to invest. Those who get ahead with money understand that investments are critical to financial growth, so for them, investing is never the second fiddle to saving. Yes, it is essential to save money for the rainy days ahead; however, your investments will play a crucial role in your journey to wealth.
The idea of putting money in a bank or a safe until the day you want to retrieve it is commendable. However, you shouldn’t stop there if you desire to put your broke days behind you. This is because most savings accounts offer next to no returns in exchange for being able to use your money. This means that the more money you are leaving in the bank, the more money that’s being lost due to inflation.
With well-researched and proven investments, on the other hand, you can achieve healthy returns which will allow you to rise out of financial mediocrity and into the wealth ranks of the rich. And keep in mind that the more you end up investing, the more you allow compound interest to work for you to amassing more investments quickly has its benefits.
Now, of course it’s not all upside when investing. All investments come with their associated risks but if you don’t have any tolerance for risk then I hate to say it but you will never achieve the financial goals you’ve set for yourself. You have to accept risks and seek to make well-calculated ones while also remembering to never invest money you can’t afford to lose. However, just keep in mind that even saving has risks so you may as well get a better return for the risks you are already taking on!
Number 5: You spend all your free time having fun
This one is bordered on laziness. Sure, we all like having fun but there’s no way you’ll get ahead by spending all your free or leisure time playing around. Those who get ahead financially are those who maximize the free time and shortly I’ll share with you some activities you must start doing to take your finances to the next level!
If it’s short-term cash you’re looking for, your first option is to get a second job. By working a second job, you gain an easy avenue to more cash that you can save and invest for tomorrow. Moreover, working another job sets you up with new skills and a larger network, both of which are essential for growing your income-generating abilities.
Alternatively, you can boost that income of yours by creating and running a side hustle. A side hustle is a great way to make money through activities you love while working on your own schedule. If you ask me, there’s no better way to increase your income and have fun doing it!
Finally, another way to ensure your future financial success is by spending your free time learning. In relation to your finances, there are tons of ways to learn like books, YouTube, blogs and the list goes on. Remember, when it comes to your money, ignorance is never bliss. Burying your head in the sand while a storm gathers all around will not do at all because you can’t wish your problems away. Your best bet is to confront your reality and invest your time into growing not only your bank account but your knowledge base as well! In conclusion, there are some money lessons I had to learn the hard way so you don’t!