The Top 10 Mistakes People Make With Their Finances

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In a recent Wealth Habits talk, Chris Brady shared some of the financial lessons he has learned over the years and formulated a list of the top 10 mistakes people make with their finances.

Here they are, in no particular order:

  1. People don’t understand what money is actually for.
    • Many people think that money is something that you earn and then you’re suppose to spend it on something that you want.
    • In America, we use something called credit in order to amplify our buying power in order to live a life bigger than what we’ve actually earned.
    • Money is actually security!
      • Money can buy you safety. It can bring you prosperity for the future. You can actually make money that goes out and gets you MORE money. You can have money be your slave instead of you being a slave to money.
    • Money is a stewardship.
      • Money is a tremendous gift and it can do great things in people’s lives. We should be generous with our money in order to help others.
    • Money is the fuel that helps you live your life’s purpose.
      • Money is an enabler of your God-given purpose, and if you waste it, you won’t be able to do the things you are destined to accomplish in life.
  2. People GET IN and STAY IN consumer debt.
    • People fall for short-term gratification.
    • People fall for materialism and status (everyone around them is doing it).
    • People buy-in to the middle class mania that says debt is not only acceptable, but it’s actually necessary.
      1. For example: mortgages, student loans, credit cards…
    • When you get sucked into consumer debt, you become somebody else’s asset.
  3. They listen to the wrong people.
    • Be careful who you listen to. They might be broke.
    • Your income and lifestyle will be an average of the 5 people you hang out with the most.
      • You don’t want to adopt broke thinking.
    • Even worse, sometimes we can get caught into listening to people who are incentivized to give us advice that isn’t in our best interest. Their agenda may not match our agenda.

      “Be careful who you listen to. They might be broke!” – Chris Brady

  4. People spend where they should economize, and they economize where they should spend.
    • They don’t invest in themselves.
      • More often than not, people aren’t doing anything to invest in themselves. They aren’t growing personally, they’re not involved in increasing their skills and ability to do better in life.
    • People let things fall through the cracks.
      • For example: Some people don’t have the proper insurance in their life. They have children but they don’t have life insurance. They’re driving around without auto insurance. BUT, they have the latest iPad.
      • People skip or go delinquent on their taxes.
      • People don’t set money aside to try to generate more cash flow.
      • People will sometimes skimp (tighten up) on little purchases and then binge on a big purchase.
        1. For example: They’ll put their wife on a $5/wk allowance and then go splurge on a Corvette.
  5. They don’t respect and cultivate cash flow.
    • Cash flow is much more important than capital gain and it’s more steady and reliable.
    • You should always look at the ways money can generate more cash flow. Get money working for you.
  6. They don’t save enough and they don’t have an emergency fund.
    • Some statistics:
      1. According to a Federal Reserve Report, nearly half of Americans couldn’t cover a $400 emergency expense without borrowing the money or selling something.
      2. More than half of households have less than one month’s worth of income in a readily available savings account.
      3. Many people have no savings account at all. In fact, almost 30% report having a $0 balance. 62% of people have less than $1,000 in savings. An additional 21% (1 out of 5 people) report having no savings account at all.
      4. More than 25% of people between the ages of 50 and 64 have not even begun saving for retirement.
      5. An estimated 38 million households in the United States live hand to mouth. Meaning they spend every penny of their paycheck.
  7. They don’t save the RIGHT way.
    • They don’t diversify their savings. They have a 401K plat at work and that’s all they have.
    • People hand their money to someone who doesn’t have the same agenda that they do.
      1. They save and put money away but then they pay too much in fees and expenses. They buy into the pop literature of the latest mutual fund and they end up paying huge front-end dollars. Or, they hand their money to some slick guy in a suit who promises to manage their money for them but in the fine print it ends up costing them a lot of money.
  8. They get fleeced by “experts.”
    • They put their money in the hands of someone who has more control over it than they do (because it may be in an area they don’t have any expertise in).
      1. NO ONE will ever care as much about your money as you do!
      2. Don’t ever turn your back on your own money- no one will ever watch it like you’ll watch it.
  9. They don’t stay with an investment plan long-term.
    • The power of compounding gets amazing over time. You want to give it “that time” for it to work. But, for most people, short-term thinking creeps in and people take their money out, move it around, or change strategies.
  10. They don’t start saving early enough, go in hard enough, or stick with it over time.
    • For the older generation, you may think it’s too late to start saving…but it’s never too late.
    • “The single most important thing you can do to achieve financial security is to begin a regular savings program and start it as early as possible. It’s critically important to start saving now! Trust in time, rather than timing.” – Burton Makiel
    • You can only get poor quickly. To get rich (by investing or saving money), it will go slowly, and you have to start now. Slow and steady wins the race.
    • Maximize how much you invest or put in. There is power in putting in as much as possible, as soon as possible, because the power of compounding takes off even more.
      1. For example: One person puts in $20/month for 40 years into an investment and another person puts in $100/month for 40 years- both with a 9% return. The person who put in $20/month will have $94,330 at the end of 40 years. However, the person who invested $100/month for 40 years has $471,650!

We’ve all probably messed up in one of these, but every one of these is under our control. If you can gain control of all 10 of these, you will not only beat the Financial Matrix, you can beat the investment matrix and you can live the life you’ve always wanted.

(Posted by Kristen Seidl, on behalf of Chris Brady)

The information presented on this blog and in any of its videos is for general educational purposes only, and provides information the authors believe to be accurate on the subject matter covered.  It is presented here with the understanding that neither the authors nor the publisher are providing advice for any particular portfolio or for any individual’s particular situation, or rendering investment advice or other professional services such as legal or accounting advice.  If expert advice in areas that include investment, legal, and accounting are needed, please seek a competent professional’s services.

This publication may make reference to performance data collected over various periods of time.  Remember that past results do not guarantee future performance.  Performance data, as well as laws and regulations, change over time, which could affect the applicability of the information presented on this blog and its videos.  Any data presented herein is used merely to illustrate the underlying principles.

This blog and its videos are not to serve as the basis for any financial decision or as a recommendation of any specific investment.

No warranty is made with respect to the accuracy or completeness of the information contained herein, and both the authors and the publisher specifically disclaim any responsibility for any liability, loss, or risk, personal or otherwise, which is incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog and its videos.

2 responses to “The Top 10 Mistakes People Make With Their Finances

  1. Thanks for posting this as a blog. One of my favorite financial CDs. I know Chelsea and I are very thankful for what we learned with the Financial Fitness Program and getting a better and bigger picture of money. And we are also thankful for the Beyond Financial Fitness which we are currently using to help educate us in the different assets/investments that are out there and what would be best for our family.

  2. claver conquergood

    Great info as always Chris,I love sharing it, to help people educate themselves out of the financial matrix.

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