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Top 5 Money Mistakes Part 1 - February 2018
Sometimes it seems like the financial part of our lives is the most challenging area in which to succeed.
There’s always something that moves us backward instead of ahead toward a bright financial future. Maybe it’s some unexpected medical expenses. Perhaps the car needs major repairs. Even when we’re happy, healthy and have a great car, we might suddenly find ourselves in between jobs! Isn’t that the way it always seems to turn out?
If that sounds like your usual circumstances, then you’ll be glad to know good news is on the horizon!
According to financial experts, most of us tend to make several major financial mistakes that hold us back. If you could just avoid those mistakes, think how much easier your life would be! You could sail on the wings of financial success instead of feeling like you’re wallowing in the mire.
In this series, over the next five months, you’ll discover what these five common mistakes are and learn helpful tips on how to avoid them. Put these strategies to work for you and reap the benefits - you'll love living debt free, cashed up and laughing!
There’s always something that moves us backward instead of ahead toward a bright financial future. Maybe it’s some unexpected medical expenses. Perhaps the car needs major repairs. Even when we’re happy, healthy and have a great car, we might suddenly find ourselves in between jobs! Isn’t that the way it always seems to turn out?
If that sounds like your usual circumstances, then you’ll be glad to know good news is on the horizon!
According to financial experts, most of us tend to make several major financial mistakes that hold us back. If you could just avoid those mistakes, think how much easier your life would be! You could sail on the wings of financial success instead of feeling like you’re wallowing in the mire.
In this series, over the next five months, you’ll discover what these five common mistakes are and learn helpful tips on how to avoid them. Put these strategies to work for you and reap the benefits - you'll love living debt free, cashed up and laughing!
“That money talks, I'll not deny,
I heard it once: it said, ‘goodbye’.”
~~Richard Armour~~
Mistake #1: Having No Financial Plan for the Future
When it comes to financial planning, many people have no plan. Maybe it’s something we just don’t think about. We tend to have very general dreams like, “One day I’d like to take the family on a world trip. One day I’d like to retire.”
But without taking the time to set a timeline for these goals, it’s very hard to accomplish anything.
Typically, when individuals initially meet with a financial planner, one of the first things they’ll do is put together a long list to answer the questions, “What does your financial future look like? What are your financial goals for the next year, 5 years, 10 years, and 20 years?”
When you actually write down that information and start look at it, it helps you do these 5 important things:
1. Identify financial areas which you need to research. Financial planning isn’t something to take lightly. Figure out your spending patterns, savings plan, and investment goals.
2. Set specific financial goals for the future. Once you've done your research, it’s time to set some financial goals to get you focused and ready to move ahead.
3. Begin putting money aside in order to reach your goals. Once you have your financial plan in place, take action and start saving.
4. Motivate yourself to stay the course. Once you see "the big picture" of your financial future, you’ll probably feel a little overwhelmed at first. But more importantly, you should start to feel excited and motivated to reach your goals.
5. Get out of debt. I cannot stress this enough. If you have debt you own nothing and can lose everything so do everything you can to get out of debt. By the time some individuals go to see a financial advisor, it’s because they’ve already gotten themselves into debt and are seeking advice on how to get out.
When you put together a financial plan, try and stick with it for the rest of your life. Adjust it as needed, but stay with it. It’s not something you just do once and forget about, it needs to be worked to be successful. Many individuals are naturally focused on the short term. That’s fine, as long as you’re also considering the future.
Consider these 3 time frames for your savings and investing goals:
1. Short-term goals. Your short-term goals are the financial issues you want to address between now and the next 3 years. This is the time to:
Purchase a vehicle and obtain insurance coverage for all areas that apply (car, home, health, and life).
2. Intermediate goals. Your intermediate goals are those you plan to address in 3 to 10 years. During this time, you might want to:
3. Long-term goals. Your long-term goals involve your financial outlook in 10 years all the way until retirement. Options like these might be in your long-term goals:
Once a year is a good checkpoint to ensure things are on track with your financial plan. It’s like seeing your doctor once a year for a check-up. If you do this, it prevents any major issues from coming up.
The best way to plan for your financial future is to create the plan and then check up on it regularly. Stay on track and you'll be glad you did!
When it comes to financial planning, many people have no plan. Maybe it’s something we just don’t think about. We tend to have very general dreams like, “One day I’d like to take the family on a world trip. One day I’d like to retire.”
But without taking the time to set a timeline for these goals, it’s very hard to accomplish anything.
Typically, when individuals initially meet with a financial planner, one of the first things they’ll do is put together a long list to answer the questions, “What does your financial future look like? What are your financial goals for the next year, 5 years, 10 years, and 20 years?”
When you actually write down that information and start look at it, it helps you do these 5 important things:
1. Identify financial areas which you need to research. Financial planning isn’t something to take lightly. Figure out your spending patterns, savings plan, and investment goals.
- Do you have children you want to send to private school? Do you have superannuation through work? Are you salary sacrificing to boost your superannuation? Are you planning and saving for your retirement (on top of your superannuation)? Do you want to purchase some stocks and bonds?
- Once you answer some of these important questions, it’s time to do your research. Figure out your financial personality - are you ultra-conservative, never wanting to take a risk? Are you up for anything even if the ROI sounds too good to be true? Are you willing to risk it all for the chance of a bigger ROI? Decide out what types of accounts would be most beneficial for you and your situation.
- Some things to consider are your age, the amount of money you can invest, the level of risk you’re willing to take, and the taxes associated with different accounts.
2. Set specific financial goals for the future. Once you've done your research, it’s time to set some financial goals to get you focused and ready to move ahead.
- Put these goals in writing and in a place where you can refer to them often.
- Consider reassessing your goals at least once a year, just in case you've had any major changes in your life that would require adjusting or eliminating a previous goal or adding a new one.
3. Begin putting money aside in order to reach your goals. Once you have your financial plan in place, take action and start saving.
- Setting goals is great. But if you’re not following the plan, you’re wasting precious time. Retirement might seem a long way in the future, but time goes fast and now is the time to start setting money aside.
- It’s very easy to get into the habit of procrastinating. Many people make excuses and say money is tight this month, so they'll put money into that account next month. Guess what? They say the same thing next month too. Avoid this pattern!
4. Motivate yourself to stay the course. Once you see "the big picture" of your financial future, you’ll probably feel a little overwhelmed at first. But more importantly, you should start to feel excited and motivated to reach your goals.
- Who wouldn't sleep better at night knowing their financial future is all planned out and looking bright? Imagine how good it will feel to get monthly or yearly statements on your accounts and see how your money is accumulating.
- Seeing positive outcomes will keep you motivated to continue on the path to financial success.
5. Get out of debt. I cannot stress this enough. If you have debt you own nothing and can lose everything so do everything you can to get out of debt. By the time some individuals go to see a financial advisor, it’s because they’ve already gotten themselves into debt and are seeking advice on how to get out.
- If you’re in debt, you probably aren't in any financial position to be investing in the stock market. But where will this leave you in the future?
- Maybe you’re barely keeping a roof over your head. Are you wondering what you can do to make your situation better?
- Let's say you have a mortgage. Most homeowners just go on autopilot to pay it off. But what if you want to pay it off faster? Use a mortgage calculator (every bank has one on their website and they are easy to use) to see how much faster you can pay off your mortgage and how much interest you'll save by increasing your payments. It’s a free online tool to help you figure out some other options.
- Using this tool, you can start pondering questions like, “If I save an extra $100 a month and put it towards my mortgage, how much faster will I get out of debt? How much interest will I save?”
- You’ll begin to see the difference between a dream and a goal. If you’re just daydreaming, “One day I’d like to get out of debt,” you may never get there. But if you actually write down, “I’d like to be debt-free in 15 years,” it gives you a chance to start figuring out how to get there.
When you put together a financial plan, try and stick with it for the rest of your life. Adjust it as needed, but stay with it. It’s not something you just do once and forget about, it needs to be worked to be successful. Many individuals are naturally focused on the short term. That’s fine, as long as you’re also considering the future.
Consider these 3 time frames for your savings and investing goals:
1. Short-term goals. Your short-term goals are the financial issues you want to address between now and the next 3 years. This is the time to:
Purchase a vehicle and obtain insurance coverage for all areas that apply (car, home, health, and life).
- Establish good credit by paying off your personal loans, being on time with your current bill payments and not getting into debt.
- Create a plan for savings, investments and retirement, as well as an emergency fund.
2. Intermediate goals. Your intermediate goals are those you plan to address in 3 to 10 years. During this time, you might want to:
- Set aside money if you plan to get an advanced degree.
- Plan for wedding expenses and a down payment on a home.
- Prepare for the expenses associated with the birth or adoption of a child.
- Assign someone as your power of attorney and draw up a will.
- Increase the amount of money you’re saving and investing, if at all possible.
3. Long-term goals. Your long-term goals involve your financial outlook in 10 years all the way until retirement. Options like these might be in your long-term goals:
- Start a savings account to provide for the education of your children.
- Continue paying into your retirement accounts and make housing and other plans for your retirement years.
- Plan to support aging parents and make considerations for long-term health care for them as well as for yourself and your spouse.
- Meet with your financial advisor to discuss finances 3 to 6 months before you retire.
Once a year is a good checkpoint to ensure things are on track with your financial plan. It’s like seeing your doctor once a year for a check-up. If you do this, it prevents any major issues from coming up.
The best way to plan for your financial future is to create the plan and then check up on it regularly. Stay on track and you'll be glad you did!
“Thoughtful financial planning can easily take a backseat to daily life.”
~~Suze Orman ~~