The 10 Mistakes That Stop You From Mastering Money

When we’re young a lot of us aren’t taught the ins and outs of the money world from our parents. Our education system doesn’t always do us proud on the subject either. Knowledge on all things money including how to control it, make it and multiply it, often eludes the best of us through no fault of our own and frequently this gap in comprehension results in us struggling to make ends meet and travelling down dire financial streets.

I’ve compiled a list of some of the most common money mistakes we all make and by recognising and changing these behaviours you can get to a place of financial stability in no time, your wallet will thank you for it.

Not Understanding Your Money Relationship

Everyone knows our attitudes, values and beliefs shape our thoughts and our behaviours but where do these originate from? Probably your upbringing, family group, education, peer group, race, culture, etc. Research has shown the relationship we form with money is heavily influenced by unconscious learning, by osmosis if you like. For example, if your parents suffered a business closure or personal financial hardship, it’s likely to make you much more cautious than what you might otherwise be.

If we can understand the relationship we have with money has come about by us subconsciously absorbing the thoughts and feelings or others, we’re likely to be able to stand back, examine our own belief system and then change the money behaviours we personally exhibit that don’t serve us.

Failing To Engage In Conscious Thinking & Proactive Behaviour

The thoughts you form in your conscious mind feed into your sub-conscious mind. Hence to change our reality we need to be aware of our self-talk. Our self-talk leads to the image we hold of ourselves which determines the behaviours we exhibit. In simple terms, what we think determines our beliefs which consequently determine our actions which lead us to creating our reality.

For instance, if you tell yourself you need to gain more knowledge about money, you’ll start to actively look for and read books and attend courses which will provide you with that information. Your conscious thinking will lead you to exhibiting proactive behaviour which will help you create a new reality.

Stopping Learning Because You’ve Finished School

Recently I took up learning to dance. I was pretty nervous about this. As grown-ups we don’t like doing new things where we can look silly or be embarrassed. After about 30 minutes I got over myself and got down to the business of mastering my three left feet and started to learn.

Learning shouldn’t stop just because we’ve stopped attending school. This includes learning about money. You cannot practice what you don’t know, so get cracking. Build up your knowledge by actively learning about how the economy works, how certain events occur at particular times, what this can mean for you personally, how you can capitalise on it, etc.

Refusing To Track Dollars & Cents

Part of effective money management is accounting for your coin. If you have no idea where your money is actually going, you don’t have a snowball’s chance of controlling and growing it. This means you have to engage in a data gathering and analysing exercise. Yes … you have to draw up a budget identifying all your income and expenses. Many people dislike this exercise intensely because deep down they know they’re suffering from Affluenza and living above the line. They put off completing a budget, likening it to going on a diet! If this is you, get an attitude adjustment. To use the words of Nike “Just Do It”. Failure to complete a budget and plan holds you back from realising your financial future.

Know this … personal financial peace and wealth creation involves tracking, measuring and making effective use of your money. Everyone needs to do this. Even Governments have to do it.

Understanding the ins and outs of your money is not enough but it’s an essential start, as this knowledge will aid you in taking your next step – creating a realistic plan to achieve the money objectives you want to attain.

Saving Instead Of Investing

There’s a real difference between saving and investing but lots of people don’t distinguish between the two. Just to be clear, savings involves parking your money in cash in a bank account. Investing on the other hand refers to putting your money into some kind of asset that appreciates.

Undoubtedly you need to keep enough cash for emergencies and short-term spending but locking all your money up in a savings account is one sure way to keep you poor. This is because despite interest being paid by the bank on your savings balance, over time your money will lose value due to real inflation (real rate) and taxes.

If you want to eventually live financially easy, or at least relatively pain free, you’ll need to leverage off of your savings (invest them and probably a bank’s money) because real wealth tends to come about when asset prices increase.

Investing In Something You Don’t Understand

Following on from the above point, never invest in something you don’t understand. Take the time to learn about it before investing. Read up on the proposed investment. Talk to those who do understand it.

In particular, you should understand how the ‘investment’ functions, how it compares to other opportunities and specifically how it will help your wealth increase. From this you need to comprehend the risks involved and the strategies you must adopt to mitigate or lessen those risks. Overall, if you can’t fathom out these points, don’t invest. By the way, this principle should not be confused with being scared to invest. That’s an entirely different matter.

One final point – this advice applies equally to buying investments directly yourself and to investing in family and friends businesses.

Failing To Put Inheritances To Work

Inheriting money or some other asset is like being handed a winning lotto ticket. It’s a golden opportunity to kick-start your financial life and plan for your retirement.

For many however, they abuse what they’ve received by spending it all. Someone has likely gone without and worked hard to build up their assets in order to leave their wealth to the lucky recipient. Squandering the opportunity it brings is to me plain disrespectful.

Others, often out of fear or through lack of knowledge or blind willfulness, do nothing. They either let the inherited asset sit there or they fail to put it to work and capitalise on it.

I have first-hand knowledge of this. Each adult child was left $187,000. One sibling refused to listen to legal and financial advice and lost the inheritance entirely. The other put it to work. Over six consecutive years, she used the initial inherited money to invest in three properties which grew to $3.51m. This was as a result of a combination of factors: gaining some solid knowledge about property, using her inheritance and bank money, an economic uplift. Make no mistake however – without the inheritance being put to work this increase in her wealth would not have been achieved.
Be grateful for your inheritance and make it work for you.

Taking On Partner’s Debts

Money can be a difficult subject to talk about for lots of people but in my book, I think it’s vital romantic partners have this discussion early on in their relationship. When they move into a more permanent state of affairs, it’s beneficial if both partners are on the same page in relation to spending and saving money. Unfortunately, this isn’t always the case.

Differences can certainly arise and frequently these occur at certain points in a relationship, such as when a one spouse goes into business and asks his partner to co-sign a business loan. Women wanting to be supportive frequently sign documents without understanding their significance. Always take your own legal advice. Be aware of what risks to your own and your joint assets you are incurring by signing loan and other business documents.

You can be a supportive loving partner without putting everything on the line. There are ways to structure personal and business affairs that mitigate lots of the risks associated with borrowing money and entering into certain transactions. Remember … get professional legal and accounting advice. It will be to you and your partner’s peril if you aren’t front-footed on this point.
Funding Kid’s Lifestyles

All parents know having children is expensive but some parents don’t know where to draw the line. Many parents fund their adult child’s lifestyle and I’m not talking about helping pay for university fees. The financial support I often see parents provide is way beyond that. Parents will put their own needs and even their retirement on hold to assist their adult children. Some parents even take on debt themselves to help their adult offspring.

Personally, I don’t believe this serves either parent or child well. You want to strike a balance by providing enough support to help your child be happy but you also want them to be independent and productive. At the same time you don’t want to undermine your own financial affairs.

Have a plan. Set clear boundaries. Show some tough love if necessary. Ask yourself, will giving the money help your adult child become self-sufficient or simply continue their dependency?

Sharing Money And Assets With Subsequent Relationship Partners

The majority of clients I deal with who are in second and third relationships don’t mind sharing what they build together with that new romantic partner but they want a level of protection against losing the assets they bring to the relationship. I can understand that. Frequently assets have, in part, come from a deceased spouse and there are children’s inheritances to consider. Additionally, no one wants to share all their wealth two and three times over and end up living on the bread line at the age of 70.

A way to manage this is to have a trust which holds your personal (separate) assets along with a property relationship agreement. In my opinion, both are essential if you want to protect your separate property (assets) in scenarios where the relationship breaks down.

CONCLUSION

The above are just some tips. There’s lots more to building your wealth, including knowing what steps you need to take but you’ll have to read my books for that info.

In signing off, I want to make one final point … wealth comes in many guises, including possessing good physical and mental health and close loving relationships with family and friends. Having financial peace of mind doesn’t exclude aiming for having these things in your life. After all, you don’t want to be the richest loneliest corpse in the graveyard.

Ciao. Janet