The 4 Biggest Mistakes People Make With Their Finances
Updated: Mar 29
By Bill Savellis
Mistake 1: They Don't Set Goals
Goal setting is what happens when you choose to switch from passively going with the flow to being actively involved in planning your personal finances. It’s easy to sleepwalk through your financial life if you don’t have a direction. Disaster!
Not setting goals, even small, short-term ones is a common and usually painful mistake. If you don’t identify your financial goals, it’s hard to develop a roadmap to achieve them.
One of the most common reasons for overspending is the failure to develop a budget, which delivers on your goals.
People who don’t plan or budget tend to find they are living from month to month and wonder why they never have the money to pay their bills when they need it. No wonder they are feeling stressed!
Once you set some clear goals and develop a strategy and a budget to support those goals, you’ll find you quickly get into the habit of watching where your money goes.
And goals don’t have to be complicated. Whether it’s paying off your mortgage, becoming debt free, paying your children’s schools fees or funding your retirement having a blueprint for success is critical to helping you stay focused and on track financially.
Creating a goal and a matching budget, however, isn’t something that has to be complicated. Thanks to the many personal finance apps on the market, it’s easy to create your financial targets. You can even use a simple Excel spreadsheet.
Goals and budgets may not come naturally to many people. It does take time and effort initially. However, if financial independence is your dream, the best place to start is by identifying your financial goals.
At Infocus, we support your financial goals by providing you with timely, accurate updates on your progress. Now isn’t that the perfect motivation to have big financial dreams?
Mistake 2: They Don't Pay Themselves First
Talking and doing are two very different things. Nowhere is this more apparent than when it comes to the issue of savings. Putting a little something away for tomorrow is generally recognized as the key to successful financial planning.
Conceptually, we understand the concept of saving and how important it is. However, while we pay lip service to that ideal, we often opt instead to fund our lifestyle today.
After all, why park cash in some dusty investment that we could be having fun with now? Why sacrifice your new car, sofa, mobile phone or overseas holiday when they could be yours right here, right now? Why live frugally when a comfortable life can be yours tomorrow?
Saving was and remains the key to future financial happiness. You cannot achieve financial independence and accumulate wealth unless you save part of what you earn. That is a fact.
So, you have a choice to make. Do you make saving a priority ahead of funding your lifestyle?
Aside from providing for a comfortable financial future, there is always the inconvenient reality that things go wrong. Your car breaks down, your big screen television dies you get sick or lose your job.
It’s never too late to prepare for when life’s unexpected tribulations occur. Start by setting some money aside as a rainy day contingency plan in an emergency fund.
Next step is to develop a budgeting to understand where your money is going. Armed with that information you can make choices about where to direct your spare cash to ensure you can live comfortably, while still saving for a comfortable future.
At Infocus we understand juggling your cash flow isn’t easy. We also know managing your cash flow is the path to true wealth creation. Together, we help you master control of your money.
Mistake 3: They Don't Think Like A Business
While you don’t have to run a business to enjoy a successful lifestyle, some of the behaviours successful business exhibit can help you achieve financial success. If you don’t plan for the future, or control your day-to-day finances, disaster is inevitably lurking just around the corner.
Most sound businesses devote time and effort to planning and budgeting. These activities are not exciting and they’re not exactly stimulating at least initially. However, these disciplines can deliver tangible financial benefits and once you start to see the financial results that come from them, chances are you find yourself getting pretty excited!
Think of it like this. If you were a business, would you be an attractive investment? Alternatively, do you manage your lifestyle on a not-for-profit basis or are you a loss leader?
It is a fact of life that whether you are a small family owned business or a multinational; a budget is a critical first step down the path to ensuring your money is actively working in the background on your behalf. If you make the mistake of not adopting sound business practices in your personal financial life, the alternative is being controlled by a constant need to scramble to pay bills and provide for your future. Waking up one day to discover you are falling short of your financial goals can be a disaster.
Financial security and a comfortable retirement often come down to making sound business decisions in your private life. Navigating the choppy waters of paying off your mortgage, while funding your retirement, paying taxes and still enjoying a decent lifestyle is a challenge.
Here at Infocus, we help you think like a business. We assist you in assessing a range of financial options that will deliver the right results for your family’s needs. Like any good business managers, we also help you tweak your financial strategy along the way when the investment climate or your circumstances change.
Mistake 4: They Don't Track Results
Staying on top of your personal finances can be challenging, tedious, and even frustrating. However, one of the worst mistakes you can make is to not track the results of your investments or budgeting.
Markets are volatile. Investment outlooks can change in the blink of an eye, currencies go up and down. Consumer confidence and business sentiment can go down seemingly overnight.
Not tracking the results of your investments can prove to be painfully expensive, as can not monitoring where your money is going.
Spending more than you earn is a guaranteed way to bury yourself in debt. Similarly, failing to monitor where your money is going each month can leave you struggling at the end of the month to make your car payment or buy groceries.
Happily, learning how to keep track of your personal finances is not complicated. All it requires is a little time up front and the discipline to follow through with your monitoring.
OK, we all lead busy, hectic, time-poor lives. Juggling the competing demands of work, family and friends can leave you too tired to check your monthly bills or track the results of your financial planning. It’s easy to let things slip when you feeling exhausted and overwhelmed.
So, finding the time to manage your personal finances is a continual struggle. However, neglecting to track performance can be a serious and costly mistake. Sometimes unravelling an investment can be as important as picking an investment winner. Poor results can play havoc with your financial goals and threaten your retirement, creating yet more financial stress and uncertainty.
This is where an experienced financial advisor can step in. They can help you understand your options and assist you in making the right decisions to secure your financial future.
With Infocus onboard to help you monitor the results of your investment strategy, you can enjoy the headspace to ensure both your short and long-term goals are being met and your financial future secured regardless of what is going on in the market.
Information published on this website has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained in this document is General Advice and does not take into account any person's particular investment objectives, financial situation and particular needs.
Before making an investment decision based on this advice you should consider, with or without the assistance of a qualified adviser, whether it is appropriate to your particular investment needs, objectives and financial circumstances. Past performance of financial products is no assurance of future performance.