It is no laughing matter to see people making these money management mistakes. Have you made these mistakes with your hard-earned income?
1. They never have worked out how much income they really need every week to do better than just pay their bills. They haven’t worked out a budget.
The appropriate definition of a 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 don’t pay yourself first into a savings plan, you’ll stay poor while you make your vendors rich. Every vendor that you pay is in business to make profits. Shouldn’t you be running your business to make a profit? Your income goal must include a profit or the enterprise will fail financially.
2. They haven’t worked out a way to make more money than they need, and then be willing to do whatever is required to carry out their plan.
By incorrectly estimating the amount of money necessary to do better than just break even, they almost always set their income goal too low and lose more money by living on credit instead of going into action to raise their income. Anyone can discover different ways to make more money; it is usually the ‘willingness to do whatever it takes’ that seems to be the problem.
3. They have a habit of spending more money than they make.
Using your income to purchase the ‘appearance’ of being wealthy is a deadly activity. I refer to this breed of spender a Gratification Groupie. This can catch up with you quickly and over a short time can drown you in debt. Being in this situation causes constant stress about money and brings on lots of sleepless nights. Money does not buy happiness. However, doing something productive and worthwhile and knowing you are appreciated for it can make you feel like you are on top of the world.
4. They don’t figure out what they will need in the future and then set aside a little money every week so they can pay cash for the purchase later.
Purchasing something with a credit card because you don’t have the money 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 method to purchase things, especially big ticket items, is to put away a little every week till you have enough cash to buy the item, and then go out and negotiate a big cash discount. The guy with the CASH IS KING!
5. They purchase products and services based on WANT rather than on NEED.
Purchasing decisions should be based on how your purchase of the service or product will help you produce more 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 work more efficiently because you are out of the office making more money?
6. They don’t contribute to a retirement savings plan so they have money 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 says the cost of living is going up 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 stay even. Why does the government report that it is only 3 – 3.5%? Regrettably, it’s because the government has to raise Social Security payments every year by the percentage they report. The Social Security system is already bankrupt and those living on Social Security alone are headed in the same direction.
7. They don’t build up multiple sources of income. If one source disappears they are in financial trouble.
The old saying ‘don’t put all your eggs into one basket’ holds true today, especially when it comes to income sources. Locate profitable services or products that you can add, or business ventures you can participate in that are ethical, and have a great chance of producing a residual income.
8. They worry about the low interest banks pay on savings accounts while they are getting killed with substantially higher interest charges by carrying balances on their credit cards.
If you have substantial credit card debt, it is more advantageous to use excess cash to reduce the debt and get out from under the high interest payments instead of trying to earn interest from the bank. As you reduce your debt, you should also keep sufficient cash on hand to cover a few months of basic living expenses. Once the debt is gone, or close to it, then begin investing the excess cash where you can get real growth.
9. They get stressed out about ‘the economy’ in general.
I’m amazed that people are actually more worried about ‘the economy’ than about their business or household failing financially. They stress over what the news tells them about ‘the economy’ when that is something they can’t control, while never looking at how they are affecting the economy of their own business or household, which is something they CAN control. An increase in unemployment is no cause to worry. Small business’ creation of new jobs greatly exceeded the loss of jobs in big corporations, according to the latest ADP report. A failing bank is no reason to panic. Banks receive funding for bailouts from the FDIC and other investors. No one is standing by to bail out your failing business. That is entirely up to you. So keep promoting your business, stash some money, and sleep well at night while the dire news about ‘the economy’ rages around you.
10. They anticipate surviving financially without taking full responsibility for controlling their financial future.
There is a simple solution to money problems. Increase your income, cut expenses, and correctly manage what income you bring in. It’s not only about how much money you make, it’s what you do with it that determines your financial condition.
Proper money management is not taught in educational institutions. People receive bad advice and false information about how to handle money. Then they make silly mistakes, get into worse trouble, try to solve the problem using credit, create more trouble, and then go searching for debt relief.
Fortunately, 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 the same mistakes in the future. It is an old-school system that your great grandparents used before the days of credit cards. Very rich people understand and use this system today.
Sandra Simmons, President of Money Management Solutions, has years of experience helping company owners manage their money to achieve their financial goals.
