Financial Mistakes To Learn From

In this day and age, there really shouldn't be any reason to make certain financial mistakes. Do a search of the internet and you will find that there are thousands of articles out there that warn you of the pitfalls of certain choices. Advice for living a financially stable life is everywhere. What are you waiting for?


In this day and age, there really shouldn't be any reason to make certain financial mistakes. Do a search of the internet and you will find that there are thousands of articles out there that warn you of the pitfalls of certain choices. Advice for living a financially stable life is everywhere. What are you waiting for?




Here are the most common mistakes that I've seen people make. I've even made a few of them myself. These are the financial mistakes that you can learn from. You've probably made a few of them yourself, they are very common.




Mistake #1: Using that little plastic card to get what you want.




We'll just start off with the number one mistake out there. This is probably the most common mistake in the country. Almost every person in the US today has a credit card. It is almost like a right of passage when you turn eighteen. There are even people out there that aren't eighteen yet that have them.




Credit card debt is the fastest way to ruin your finances. It is easy to acquire and difficult to pay off. The minimum balance doesn't pay off enough of your outstanding balance to help you very much. You will be paying on your balances for decades. Even a $500 balance can take you over a decade to pay off if you simply make the minimum payment.




Add in the interest rate, which rarely goes down. If you miss a payment, you will really be paying the bank. Thirty percent interest is common on a credit card once a payment has been missed. And you only have to miss that payment by a day -- which can happen in the mail or processing if you don't plan ahead well enough.




Mistake #2: Buying more home than you can afford.




With the real estate market in the state it is today, many people are regretting their housing decisions. Adjustable rate mortgages are acceptable loan products for some people. But only if they can afford the maximum rate that the loan can hit if interest rates go up. Too many people only consider that introductory rate. They stretch and purchase as much as they can afford. Then, when rates go up and their rate adjusts, they can't afford the payment. Add that to a slowing housing market, and you may have a foreclosure on your hands.




If you are going to buy a home, make sure that you purchase what you can afford. Take out a fixed-rate mortgage so that you know what your payments will be. If rates go drastically down in the next couple of years, you can always refinance. If rates go up, you are protected. Try to aim for a 15-year mortgage over a 30-year. It will save you hundreds of thousands in interest. But if you can't do it, a 30-year fixed-rate mortgage is an acceptable loan choice for the purchase of a home.




Mistake #3: Not controlling your money.




Too many people live paycheck to paycheck. They have no savings. They have no retirement plan. They have nothing to back them up in the case of an emergency. They have no control over their money.




You have to take control of your finances if you want to retire someday. You have to learn how to budget, save, invest and spend. All it takes is a little time. And once you get in the habit, you will notice that your life has more control. You should say where your money goes, not lenders or creditors or anyone else.




Mistake #4: Not saving for retirement.




There are more seniors in the work place now than there were twenty years ago. And even more than there were fifty years ago. If you want to retire with enough money to live comfortably, you have to start putting something back today. Start an IRA. Contribute to your employer's 401(k) plan. Figure out how much you need to invest and find a way to do it. This is your future. You don't want to reach sixty and realize that you can't afford to stop working. There is no guarantee that you will be able to draw social security or other forms of assistance then. What if you become ill and have to retire? What if you get hurt? Prepare for the future. Start saving for retirement today.

Saving Money Is The Slow Path To Financial Freedom

Getting a job and not spending all the money each month is the slowest, hardest, and least efficient way to build up a big pile of money. Saving money is a worthwhile net worth building activity, but it doesn’t offer much more than that unless your goal is only to have a little cash at the ever-increasing age of retirement.




This is because wages are the most heavily taxed source of income. Income taxes (federal, state, and social security) choke off about 35% of this earn...






Keywords:


savings,retirement,budgeting,personal finance,wealth building






Article Body:


Getting a job and not spending all the money each month is the slowest, hardest, and least efficient way to build up a big pile of money. Saving money is a worthwhile net worth building activity, but it doesn’t offer much more than that unless your goal is only to have a little cash at the ever-increasing age of retirement.




This is because wages are the most heavily taxed source of income. Income taxes (federal, state, and social security) choke off about 35% of this earned income before you ever see a dime. And second, your income is capped by the number of hours that you can physically work in a week; even if it pays well. Ownership is the financial goal that we all have; owning investments that will passively pay us interest and dividend checks. But there are two wildly different paths to get there. One path is very slow and slightly uncertain, and the other path is much quicker but more uncertain to accomplish.




The fastest and most efficient way to build a pile of money is through entrepreneurial activity. This way, you can get into a position of ownership without buying it, because you are creating it. You bypass the taxation tollbooth of wage-earners, and the limitations of your salary and time. The goal is to create your own piece of equity that gives you a source of income that you control. Now before you start rolling your eyes that this is too risky, too hard or you don’t know how to do it, let me give you some ideas to help reduce your hesitation.




Maybe it isn’t your money (borrowed), or your expertise (a partner’s), or skill (hired, outsourced); but if you lead the team you can create your own piece of the equity. You can start out on a tiny scale; I am acquainted with someone that earns over $100,000 with a dog walking service. She has other people walk the dogs, so that she can focus on marketing and managing her walkers. Don’t you think that you could think of a dozen similar services that might be needed in your area?




It is mentally challenging to start an entrepreneurial activity, but more importantly, it takes money, knowledge and persistence. It takes knowledge because there is always going to be trial and error in refining your business model; and it takes money because you need enough money to find a successful business formula that pays for itself before you run out of money. It takes persistence because obstacles are natural when creating or maintaining any business activity.




There are zillions of areas to become entrepreneurial and build up equity, but here is another idea that nearly all communities offer; I bet that there are at least three successful residential home rehabbers working your community. Find them and convince one of them to help teach you in exchange for being a free assistant. And when you strike out on your own and need additional help, offer to give him or her a percentage of your profit.




I want to show you an example of entrepreneurial persistence, even though it uses real estate again. There is a giant mall being built at a nearby city. I was dropping off a friend that lived there and he said that it was a great story about obstacles. The city didn’t want a new mall to take business from the downtown strip, so the developer moved the project outside of the city limits. Then the state government said they couldn’t allow it without a larger highway exit, and they didn’t have enough money to make a highway exit. So the developer raised the money and built the highway exit himself. The point is that no matter how insurmountable an issue first appeared, the developer was undeterred from reaching his goal.




Developing a side business to ramp up your income is the most financial rewarding activity you can undertake. Imagine if you took half the effort you put into studying for school and put that into business building over four years – I’d suspect your results would be far greater than setting aside some of your paycheck each month.