There are many different pieces of information that float around between books, magazines and influencers. There are some topics that people agree on and others that sit on the complete opposite sides of the table. As I have grown my knowledge getting my Certified Financial Planning CFP® designation and MBA there are a few topics that are unanimously agreed upon. Here are a couple common financial mistakes that we as a population tend to make.
- Living above our means-
When you have lived on the Ramon noodle diet, once you start having the financial means to eat well you do that as quickly as possible. Unfortunately, we also purchase the new vehicle, upgrade our home or apartment, travel more frequently, and shop more often. Before we know it we are spending our entire paycheck. A good amount to shoot for is keeping your necessary expenses to 60% of your income, 20% on variable expenses, and 20% saving and investing for your future.
- Not having an emergency fund-
Frequently life throws us some unexpected financial curve balls. The AC unit goes out, we have an unexpected medical emergency, a trip to see a family member in need, or a new set of tires. Whatever it is, if we do not have sufficient cash available, we often have to put these expenses on a credit card which charges us high interest to use their funds.
- Waiting until the “right time” to invest-
In hindsight you will always know when the exact right time to start investing was. Unfortunately, no one has found this magical crystal ball that tells them the exact perfect time to start investing. The most important part of starting to invest is creating the habit of putting your money away consistently. Making more money in the future will not fix the bad habits we created when we were making less money.
- Thinking it won’t happen to you-
Inopportune and bad things happen to people each and every day, hoping it won’t be you is not good planning. Having risk management strategies in place is important because when the unexpected happens your financial future is not derailed. Talking about insurances such as- life, health, disability both- short term, and long term. Having these insurances in place at the proper level for you is important to protect you and the people you care about most.
From the Editor: Phil Friedrich is a Certified Financial Planner and started his practice in 2010. He has a national practice working with clients in over 33 states.
He is the host of the widely known podcast, Who Knew In The Moment, which is bringing clarity to those who need to prosper financially.