There are many things you can do wrong with money. However, there are a few mistakes that are particularly troublesome. I have definitely made at least one of them, so hopefully I can help prevent you from harming your financial future. Here are three major financial mistakes that can really prevent you from having the financial future you desire:
1.) Getting a 30 year mortgage. What could possibly be wrong with getting a thirty year mortgage? After all, that is what everyone does, right? Although not everyone does, most people do. That does not make it right. You will end up paying tens of thousands, sometimes hundreds of thousands, of dollars more in interest than if you would have gotten a 15 year mortgage. Not only that, you will be in debt twice as long. By the way, if someone tells you that it is smart to keep your mortgage to get the tax deduction, that makes no sense at all. Why would you pay the mortgage company $10,000 in interest in order to save $2,500 in taxes? That is some pretty bad math if you think that will help you prosper.
2.) Trying to get rich quick. People try to do this in many different ways. Do you routinely spend money on lottery tickets? Have you gotten into day trading in the stock market expecting to hit that one big payoff? Maybe it’s a “business opportunity” you had to go thousands of dollars into debt for. If you have done any of these things, you fell into the trap of trying to get rich quick. The problem is it never works. Sure, every once in awhile it works for someone. Usually, that person doesn’t stay rich because they didn’t go about it the right way. Slow and steady wins the race. Most millionaires spent decades (not months or years) accumulating their wealth. Consistently investing money year in and year out and avoiding debt are two keys to building wealth. Always pursuing the next “big score” is not.
3.) Not figuring out who is responsible for what. This has more to do with the quality of your marriage. Before you are married, it is vital that you discuss who is responsible for what with the finances. Who is responsible for creating the budget? Who is responsible for writing the checks to pay your bills? Who is responsible for balancing the checkbook? All these things should be discussed so there is no confusion later. There are some financial benefits to this as well. If no one ever takes the initiative to do a budget, your money will not work as hard for you. If it is up in the air who is going to pay the bills, no one will and you will get late fees. Do your marriage a favor and assign your financial chores.
Avoiding these three mistakes could pay huge dividends both financially and relationally. Hundreds of thousands (if not millions) of dollars are on the line. If you aren’t yet, today is the day to start being smart with your money.
Any other financial mistakes you suggest to avoid?
Photo Credit: Lisa Brewster