Real Estate Innovation

Top 10 Mistakes People Make With Their Money

It is no laughing matter to see people making these money management mistakes. Have you made any of these mistakes with your money?

1. They never have worked out the amount of income they really need each week to exceed just paying their bills. They don’t have a budget set up.

The correct definition of BUDGET is: the calculation of the amount of money needed for an organization to function and reach its goals. If you are satisfied to just pay your bills, and you never pay yourself first into a savings plan, you’ll stay poor while you make your vendors rich. Every vendor that you pay is running their business to make a profit. Shouldn’t you be running your business to make a profit? Your income target must include enough profit or the enterprise will go broke and fail.

2. They haven’t worked out a way to earn more money than they currently need, and then be willing to do whatever it takes to carry out the plan.

By UNDER estimating the amount of money needed to exceed breaking even, they typically set their income target too low and lose more money by living on credit instead of going into action to raise their income. Everyone 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 dangerous activity. I refer to this breed of spender a Gratification Groupie. This can catch up with you quickly and eventually can drown you in debt. Being in this situation causes constant worry about money and makes for lots of sleepless nights. Money does not buy happiness. But, 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 never work out what they will need in the future and then set aside a bit of cash each week so they can pay cash for the purchase later.

Buying something with a credit card because you don’t have the money is committing your future production to the credit card company. You are then working for the credit card company as an economic slave. The correct method to purchase things, especially big ticket items, is to put away a small amount each week till you have enough cash to pay for 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.

Buying decisions must be based on how your purchase of 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 offers email retrieval and text messaging because your friends have one, or do you need it to work more efficiently 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 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 say it is only 3 - 3.5%? Unfortunately, it’s because the government has to increase Social Security payments each year by the percentage they quote. Our Social Security system is already bankrupt and those living on Social Security alone are going in that direction.

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

The expression ‘don’t put all your eggs into one basket’ holds true today, especially when it comes to income sources. Look for profitable products or services you can add, or business ventures you can participate in that are ethical, and have a really good opportunity to producing a residual income.

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

If you have high credit card debt, it is more advantageous to use excess cash to reduce the debt and stop the high interest payments instead of trying to earn interest from the bank. As you reduce your debt, you should also keep enough 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 worry about ‘the economy’ in general.

I’m surprised that people actually worry more about ‘the economy’ than about their household or business failing financially. They worry about what the media is reporting about ‘the economy’ which is something they can’t control, while never confronting how they are affecting the economy of their own household or business, which is something they CAN control. An increase in unemployment is no reason to worry. The creation of new jobs by small business greatly exceeded the number of jobs lost in major 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 waiting in the wings to bail out your failing business. That is entirely up to you. So keep promoting your business, put aside some cash, and sleep well at night while the dire news about ‘the economy’ rages around you.

10. They expect to survive financially without accepting total 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 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 something educational institutions don’t teach. People receive false information and bad advice about how to handle money. Then they make silly mistakes, get into trouble, attempt to solve the problem using credit, wind up in more trouble, and then go looking 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 those same mistakes again. It is an old-school system that your great grandparents used prior to the days of credit cards. Very wealthy people understand and use this system today.

Sandra Simmons, President of Money Management Solutions, Inc., has years of experience helping professionals and private individuals manage their money to reach their financial goals. To find out more visit www.moneymgmtsolutions.com

- Sandra Simmons