Money mistakes can happen to anyone...from people on an average salary to multi-billionaires.
When you drill down to the core reasons why we make mistakes with our finances, you’ll find a common thread; emotions.
Money is so tied to our emotions and beliefs about ourselves that it can have an impact on the choices we make.
For example, if we’re afraid for our future we might hoard our money, missing opportunities to increase our wealth or help others in need.
In such a situation the fear dictated our choices rather than our financial goals and knowledge.
Money mistakes that can trip us up aren’t always the big ones (e.g. buying more house than we can afford), they’re small choices we make that keep us from achieving the best results possible.
Here are some common mistakes people make with their finances. Do you recognise any of them?:
1. Buying things on sale
Here’s a good one that speaks to an emotional response to money.
Who doesn’t love a great sale? We feel so very smart when we snag something for 50%, 75%, or even 90% off.
But before you grab that “good deal” ask yourself a few questions first.
-Would I be as excited to buy this if it weren’t on sale? -Would I pay full retail for this item? -How much will I use this? Is it worth adding this to my “stuff”?
2. Buying “dumb” things
“Retail therapy” can empty your pocketbook fast if you indulge it too much.
Set a criteria for your spending, especially bigger ticket items and stick to it.
3. Trying to solve problems with money
Not every problem can be solved with money.
In fact, very few of them can.
Hungry? Yes, money can help, but if you’ve got a full pantry at home, going out to buy more food won’t solve the emotions that are urging you to buy more.
Maybe you’re bored...or lonely.
Find a way to deal with your emotions that will be kinder to your wallet.
4. Neglecting to spend money on “important’ things
Spend your money on those things that will add value to your life. Sure the latest iPhone would be great, but which would you prefer...getting the latest gadget or taking a special family trip that all of you would remember for the rest of your live?
Spend your money according to what you value the most.
5. Buying low quality
It’s a financially smart move to buy the highest quality possible, even though you’ll spend more.
Because if you buy the lower quality item you’ll pay less up front, but you’ll be replacing it much sooner - and perhaps more often...resulting in more money than if you’d simply purchased the best quality product from the start.
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