If you’ve made it to reading an article on money mistakes, then chances are your finances are well on their way to be in tip-top shape. Good job, Hancock! On the downside, if your making one of these 7 money mistakes you’ve got to make a change before its too late!
In talking with a friend (who makes decent money b.t.w., say 90k/yr) she was considering really cutting back on anything unnecessary now that her kids have moved out of the house. Want to know what she was about to chop? Health insurance. Which leads us to money mistake number 1..
1. No Health Insurance / Cutting Health Insurance to save money.
If you live in the US or any part of the world that doesn’t have free health care provided you will need health insurance. Basically, you pay into a health insurer weekly, by-weekly, or monthly and if any medical issues arise you’re covered.
Recently, I had a friend come up to me frustrated with her finances and said “Im going to drop my health insurance, its going to save me 400 dollars monthly”. This is a poor financial decision. Anytime you are in need of medical attention you will hesitate to go to the doctor and typically not go at all. We only have one body for the rest of our life! Take care of it.
It’s free and things that are given to us for nothing, we place little value on, things that we pay money for, we value. The paradox is that exactly the reverse is true. Everything that’s really worthwhile in life came to us free — our minds, our souls, our bodies, our hopes, our dreams, our ambitions, our intelligence, our love of family and children and friends and country.
Earl Nightingale – The Strangest Secret
As Earl Nightingale says, we have a tendency to place little value on our bodies and a lot of value over the dollars we receive. The exact opposite is true, our body and mind is what we need to even earn a dollar. Giving up health insurance, working for an employer that doesn’t offer it or simply foregoing to save a buck is a huge money mistake.
If you are unable to work, are you still going to be earning enough to cover your expenses? The average heart surgeries range from $30,000 – $200,000. If you aren’t insured and all of a sudden need to have a major surgery, you could be financially ruined in a heartbeat.
Get health insurance, switch employers to someone that offers good coverage and take care of your body and mind. Its all we got!
2. Using Check Cashing Services
Are you stopping at the bodega every Friday with a check in hand? Do you take your check to someone who will cash it quickly only to skim a few bucks off the top? If you are, this is a huge money mistake and needs to be stopped.
Every week handing over a small percentage to get access to your own hard earned money is a leak in your finances. Its paying to use your money. Rich people don’t do that, the goal is to get people to pay us for using our money. If you are using a check cashing service you are on the wrong end of the deal.
Besides, everytime we enter into a bodega or corner store that offers these services we get roped into buying a soda or snack taking another few bucks out of our pocket. Over, the course of a year this could be thousands of dollars that are literally just thrown away.
You’re smarter than that, stop using check cashing places and set up direct deposit to a checking account.
3. Using the ATM as Your Banker
Want to know another way to pay to use your own hard earned money? Yeah, that’s something nobody says.. Using an ATM for all of your transactions is crushing you bank account balance and making you pay to use your own cash. These machines charge a fee to use them, typically $2 – $5 depending on where it is. If you’re in a casino or strip club that number looks more like $10 to $15! On top of that your bank is typically going to charge a fee as well.
With all those fees, its easy to spend 6 dollars each and every time you want to access your money. This is another slow leak and by the end of the year can add up quickly to hundreds if not thousands of dollars. The best advice is to open a checking account, especially with a bank thats offering a sign on bonus, and set up online banking. No more using ATMs to check your balance and get money out, its eating away at your progress.
Citizen’s Bank is always offering great sign on incentives when you open an account with them. Currently its up to $400 dollars when you open a new account. Thats a good amount of cash, and you will be well on your way to setting up a building block for your financial future.
4. Trying to Save Money by Spending Your Time
This is a common mistake most of us have been guilty of at one point or another. We buy the airline ticket thats 50 bucks cheaper because the lay over is four hours longer. Or we stand in front of a store all night with anticipation of getting that new device for 100 bucks less. In order to attract and keep more of our money we need to shift our mindset to keep more of our time.
Just like mistake #1, our time is given to us, and it is all we have. If we work at our job and make $25/hr, that is how much our time is worth. Adding four hours to our travel time to save 50 bucks is devaluing ourselves. In that same four hours we could have made 100 dollars from our employer. It makes no sense to try to save in this way.
Rich people think in terms of time and everything we do to get there must mimic them. Sticking with the 25/hr scenario, and takes 1 hour to mow the lawn. Hire the neighbors teenage boy to mow it for 15 bucks. You automatically made a huge return on your time and money. Same goes for standing in line, accepting the longer lay over or anything that is costing more time than it’s worth.
Buy the more expensive but way shorter ticket, hire out the menial tasks that can be done for much cheaper and overall be more aware of the time spent and your value in life!
5. Not Automating 10% of Your Income into an Investment Account
Red flag alert! If you aren’t setting up an automatic investment of 10% or more of your income, then you are set up to fail. Every day that you wait to do this is another day you are missing out on the gains of the market. If you’re just starting out, don’t over think it.
Its so easy for people to see that 10% a week won’t be much and then it must not be worth it. Over time, this amount will add up to huge sums through compounding. The beauty of automation is it becomes very easy to forget about it and go on with your life. I guarantee you won’t miss the money and will adjust to your new financial position quickly.
The key is like nike says “Just Do It”. People I help coach are so hesitant in this regard and don’t get far. They say ” how about 6%” or “I’ll worry about it later”. The answer is no and no. It typically comes from a distrust of the financial markets and money in general. What reservations do you have about money and investing? Take a look at what’s holding you back and take action, this part is easy!
Automate at least 10% of your income into an S&P 500 Index fund and forget about that money all together! It will shortly add up to a lot of money, trust the process.
6. Using Apps Like Robinhood to Gamble Investment Money
These newer online apps are excellent at getting people to feel more comfortable investing. Apps like Stash and Robinhood offer a lot of free education and make investing exciting. They are really doing something good for people that want to earn money with their money. However, theres one huge drawback..
The downside is apps like Robinhood are designed to mimic gambling at the casino, and use AI to get us to trade more and more. This is not only risky but Ive seen many people with not much money try investing to “get rich quick” by making highly speculative investments. For instance, buying into Shiba Inu Coin because it must go up just like Doge Coin. Huge mistake.
These are not investments, and investing is not gambling. This mindset has to switch to thinking long term get rich slowly. I had a friend get make a lucky bet on a penny stock, HUMBLE Inc, and his $29,000 jumped to over $1.2million. He has never had that kind of money before and it came with a host of other risky behaviors. The stock quickly dropped and that 1.2 million was now somewhere worth around $165,000. This all happened after he bought a new truck, vintage boat and cool convertible sports car. He isn’t worth much more than when he got started but has way more debt!
Humans are funny in the regard that we still will believe that stock is worth over a million dollars and will continue to hold on until it goes to 0. We like to over anticipate how smart we are and this leads us to making other very risky investments to make up for it.
Getting rich quickly not only makes us over confident in ourselves, it encourages us make irrational decisions with our money. That same guy bought another highly speculative penny stock and quickly lost 2.5k in a few short days. Thus, wiping out a portion of the gains.
Stand guard to the hype in the market and making irrational investments because everyone is doing it in the name of getting rich quick. The best investments are long term and grow consistently. Use apps for knowledge and ease of use, not for gambling away money.
7. Buying Inexpensive Merchandise
By buying cheap things get you just that, a cheap experience. To save a few hundred bucks to get the cheap couch, mattress, shoes or clothes only to replace it in a couple years is a mistake. When we buy quality things they last much longer.
For example, I purchased well made dress shoes from Thursday Boot Company, and it turned out to be an excellent investment of 180 dollars. These shoes are exceptionally well made and have the ability to be resoled. I wore them down and after three years they looked horrible! The leather had softened up and they were super comfortable. I took them to my local cobbler to resin, resole and restore. The shoes look and feel brand new with many more years of life in them.
If I were to buy shoes that were half the price after two I would be back at the department store buy another set of cheaply made shoes that are less comfortable and stylish. The point here is, whatever you’re buying, make sure it is quality. When it comes to furniture, clothing, food, cars and anything that has a quality hierarchy, make sure you get the best.
Now this is not an excuse to go into high interest credit card debt over a new sofa. Amazing deals can be found on facebook market place or let go app. You can get the quality at a second hand price.
Always buy quality, it will last much longer and be a better experience during that time.