The Top 5 Mistakes People Make With Their Money

Are you better off than you were five years ago? Note I did not say financially better off though I am sure that is what most readers would interpret that to be.

Throughout my adult working life I have observed that a recurring theme with people is that they feel that having more money would be a solution to their life’s problems. Is that always true? The richest people are not always the most happy and often those with the least are the most generous.

Here are my financial professional’s observations as to how peoples’ view of money can be an obstacle to their financial goals. The 5 points are interrelated, meaning they affect each other.

1. Increasing your spending in step with salary increases. There are two problems with this. First you are not increasing your bottom line or net worth. A fancier car or more expensive vacation doesn’t get your balance sheet in the black. A larger salary should mean you increase your assets which are things that increase in value over time. Secondly your spending habits will be difficult to reign in during those inevitable dips, such as unemployment, or divorce. A good rule of thumb is to always live slightly below your means with a meaningful emergency fund. A line of credit is not an emergency fund.

2. Rushing to build wealth. People who dream up new investment ideas and products know this aspect of human nature well. They can take advantage of peoples’ impatience and novelty bias. There is no such thing as a get rich quick scheme. Patience is a key to financial success.

3. Procrastination is the number one dream killer. Putting off a developing a financial plan or positive habits are destructive. Is time your friend or enemy?

4. Trying to apply parts of generic mainstream ‘investment’ information to your finances. Here are two examples. A TFSA is better than an RRSP. Real estate is a good investment. It is not that these statements are untrue. But these ideas must be applied in the context of each individual situation as part of the bigger picture. Unfortunately the list could go on and on.

5 Not identifying needs and wants, or believing wants are needs. This will lead straight back to #1.

Financial success is not the best or newest financial product. It is the dedicated application of a proven process over time, and managing behavior and expectations with an eye to the bigger picture or future goal. Take advantage of my expertise and experience to help you on your financial journey.