5 Common Money Management Mistakes
Money management (or cash management) can be difficult but is absolutely necessary. One or two bad financial habits can quickly lead to growing debt, and even cause you to come up short month after month. Most people want to achieve financial independence but seem to stumble into many pitfalls that can negatively affect their financial future. Below are some of the most common mistakes that individuals make when it comes to money management.
Whether you're in Massapequa, Long Island, or anywhere else, MLS Financial Planning can help you think about these and other cash management and financial planning issues and concerns.
1. Spending Beyond Your Means
Many people fall into the trap of living well beyond their means. Whether it's the need to keep up with the Jones's, or spending, in the same manner, they did when their parents were covering their expenses, many individuals are finding themselves in serious debt. Excessive debt and the possible credit problems that it can bring can cause consequences for years, such as problems borrowing money, higher interest rates, and the constant stress of just trying to get ahead financially.
2. Not Creating or Sticking to a Budget
While budgeting is not one of the most exciting things to do with your free time, it's a vital tool to help secure a solid financial future. MOST BUDGETS DON'T WORK. Many people have the mindset that a budget equals deprivation when it actually can reduce stress and help put you on a better path to achieving your financial goals.
A budget gives you permission to spend money on the things that you want to. At MLS Financial Planning, we developed a cash management planning and coaching service that helps you conquer this important aspect of your financial life. This unique program is becoming very popular and is changing the way people approach cash management.
3. Not Saving for Retirement
Even when people have a budget, they may not set aside money for their retirement savings. While retirement may be the furthest thing from their mind, investing in a retirement account early can not only help ensure that you have the proper funds that you'll need for your retirement it also allows your money to grow longer. This means a better return on the money than would be gained by investing it later in life.
4. Failing to Plan for Emergencies
Emergencies can happen at any stage of life, and when they do, it can have devastating consequences on finances. This makes having an emergency fund crucial to getting through these emergencies without having to go into debt or delaying payment on bills. A good rule of thumb is to have at least three to six months' worth of income in savings.
5. Lack of Understanding of Money Basics
Standard curriculums in public schools no longer focus on financial literacy skills. These courses used to teach students about the basic money concepts such as debt, credit, and interest, to help them learn how to manage money and make smart financial decisions. With many schools abandoning this curriculum or never having taught them in the first place, people are forced to learn these concepts on their own or seek help.
Whether it's a lack of understanding finances, failing to plan, or overspending, individuals succumb to many mistakes when it comes to finances. The best way to avoid these common mistakes is by understanding them and continuing to seek education on money management to help secure a financial future.
At MLS Financial Planning, we believe in
- Education - We educate you along the way, so you gain independence and confidence surrounding your financial life.
- Understanding - While education is very important, it's equally important that you understand what you're doing in your financial life.
- Simplicity - In a complex world, simplicity is at the root of our thinking.
- Fun - It's also important to have fun along the way.
We also believe that all of the components of financial planning (cash management, investment planning, retirement planning, insurance planning, tax planning, education planning, and estate planning), are important, but not everything has the same level of impact on everyone at the same stage of their financial life. It’s about putting the most effort in the area that has the biggest impact, so you get the best outcome. In our opinion, for most people, between 50% and 75% of their ability to become financially independent is driven by having a great cash management program with coaching.
Schedule a Complimentary Meeting or Sign up for a live, virtual presentation, to learn about our Cash Management Planning & Coaching Service.