10 Mistakes People Make With Their Money

Because these mistakes are so critical, they are nothing to laugh at. Are you making these mistakes with your hard-earned income?

1. They haven't figured out how much income they really need each week to exceed just paying their bills. They haven't worked out a budget.

The correct definition of BUDGET is: the calculation of the amount of money necessary for an organization to function and achieve its purpose. If you are satisfied to just pay your bills, and you never pay yourself first into a savings plan, you will make other people wealthy and you will stay poor. Every vendor that you pay is in business to make a profit. Shouldn't you be running your business to make a profit? The income target must include enough profit or the enterprise will go broke and fail.

2. They don't work out ways to earn more income than they currently need, and then willingly do whatever it takes to execute their plan.

By incorrectly estimating the amount of income necessary to exceed breaking even, they almost always set their income target too low and lose more money existing on credit instead of going into action to raise their income. Anyone can discover different ways to make more money; it is often the 'willingness to do whatever it takes' that seems to be the problem.

3. They habitually spend more money than they make.

Using your income to purchase the 'appearance' of having wealth is a deadly activity. I call this breed of spender a Gratification Groupie. It can catch up with you fast and eventually can drown you in debt. This situation causes constant stress about money and brings on lots of sleepless nights. Money does not buy happiness. But, doing something worthwhile and productive and being appreciated for it will make you feel like you are on top of the world.

4. They never figure out what they need to buy in the future and set aside a little money each week in order to pay cash for the purchase later.

Buying something with a credit card because you are short on cash is committing your future earnings to the credit card company. You are then working for the credit card company as an economic slave. The right way to purchase things, especially high dollar items, is to set aside a small amount each week until you have enough cash to buy the item, and then negotiate a big cash discount. The guy with the CASH IS KING!

5. They purchase services and products based on WANT rather than on NEED.

Purchasing decisions must be based on how your buying the service or product can assist you to produce additional income for you. Let's be honest here, do you want the latest cell phone that features email retrieval and text messaging because your friends have one, or do you need it to increase your work productivity because you are traveling to close the next business deal?

6. They never contribute to a retirement savings plan so they have it for use later in life.

If you are relying on other peoples' future production to pay you Social Security payments so you can retire, that is really taking a gamble. Despite the fact our government reports the annual cost of living is rising 3 - 3.5% a year, the truth is that it is going up 8 - 12% a year. You have to make that much more income just to break even. Why does our government report that it is only 3 - 3.5%? Regrettably, it's because the government has to increase Social Security payments each year by the percentage they report. Our Social Security system is already bankrupt and those living on Social Security alone are headed in that direction.

7. They never develop multiple sources of income. If one source dries up they are in trouble financially.

The expression 'don't put all your eggs into one basket' is true today, especially when it comes to income sources. Research profitable services or products you can add, or business ventures you can participate in that are ethical, and have a great opportunity to producing a residual income.

8. They get stressed out about how little interest their bank pays on savings accounts while they are getting killed with much higher interest charges by carrying balances on their credit cards.

If you have high credit card debt, you are better off using excess cash to reduce the debt and stop the high interest payments rather than trying to earn interest from the bank. As you pay off your debt, it is wise to keep enough cash on hand to cover a few months of basic living expenses. Once the debt is gone, or will be soon, then start investing the excess cash where you can get real growth.

9. They worry about 'the economy' in general.

I'm surprised that most people actually worry more about 'the economy' than about their business or household failing financially. They worry about what the media is reporting about 'the economy' when that is something they can't control, while never confronting how they are affecting the economy of their own business or household, which is what they CAN control. A rise in unemployment is no reason to worry. Small business' creation of new jobs greatly exceeded the number of jobs lost in major corporations, according to the latest ADP report. A bank failure is no reason to panic. Banks get bailouts from the FDIC and other investors. Nobody is standing by to bail out your failing business. That is entirely up to you. So keep promoting your business, put aside some cash, and sleep like a baby while the bad news about 'the economy' rages around you.

10. They anticipate surviving financially without taking full responsibility for controlling their financial future.

Money problems have a simple solution. Increase your income, cut expenses, and correctly manage what income you do get. It's not only about how much money you make, it's what you do with it that determines your financial condition.

Correct money management is not taught in educational institutions. People get bad advice and false information about how to handle money. Then they make silly mistakes, get into trouble, try to solve the problem by using credit, wind up in more trouble, and then go looking for debt relief.

The good news is that there is an inexpensive, proven, money management software system that can reverse all the money management mistakes a person has made in the past, and keeps them from making those same mistakes again. It is an old-school system that your great grandparents used prior to the days of credit cards. Very rich people understand and use this system today.

Money Management: 10 Mistakes People Make With Their Money Information about the Author: Sandra Simmons, President of Money Management Solutions, Inc., has years of experience helping company owners and families manage their income to reach their financial goals. To learn more visit www.moneymgmtsolutions.com Personal Finance Articles: http://www.article-buzz.com

Print This Article Get Re-print Code

Click the XML Icon for 'Personal Finance' Articles RSS feed