11 Common Money Mistakes That Prevent You From Getting Rich
Almost everyone would like to be rich, yet many people make financial mistakes every day that keep them from becoming wealthy — or at least from building up a nice nest egg.
So what are the dumb things that get between you and wealth? Avoiding these 11 money mistakes, provided by financial experts, will help your bank account grow.
1. Not Having a Planned Budget
Budgeting is a no-brainer, but failing to create a budget is one of the most common financial mistakes people make. If you play fast and loose with their money, you may later wonder why you never discovered the secret of how to become rich.
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“Without a budget, it’s impossible to have control over your money and know where you are spending the majority of it,” said finance expert Kelan Kline of The Savvy Couple. “Without a budget, your money has no plan and will prevent you from building your finances up indefinitely.”
2. Being Reactive Instead of Proactive
When you handle money reactively rather than proactively, you’re likely to make mistakes. If you want to know how to become rich, handle your money with a sense of purpose and make it work for you rather than spending indiscriminately.
“One thing that keeps people from becoming wealthy is living reactively rather than intentionally,” according to financial behavior coach Derek Hagen of Money Health Solutions. “Going through life without knowing what money’s purpose is for you will make it more likely that you will spend money in areas that aren’t important to you.”
3. Staying in a Dead-End Job
The saying “a body at rest tends to stay at rest” applies to many things, including jobs. Most people avoid the time and trouble of a job search if they’re already in a decent position, but that’s a big financial mistake.
“While it can be difficult to look for a new job when money is tight, considering ways to improve your career should be an ever-present thought,” said Tom Blake, owner of This Online World, a personal finance blog for young adults.
“If you are working at a company that limits opportunity, you may be missing out on a chance to increase your salary and professional development over time,” he said. “If you feel as if the company you work for will never allow you to progress, it may be worthwhile to start a job search on the side and to look for an alternative option with more financial opportunity.”
4. Overpaying for Necessities
“Paying too much for necessities could be keeping you from building wealth,” said Julie Ramhold, a senior writer for DealNews. “For instance, things like car, renter, or home insurance are absolutely necessary. But if you aren’t shopping for the best rate, then you could be needlessly spending more than you have to.”
To avoid this financial mistake, she advised: “Take the time to do some research and see what will work best for your needs and your budget. Doing so could mean the difference between saving nothing every month, and saving $100 or more a month.”
5. Living Above Your Means
If you spend all your money on a lavish lifestyle, you won’t discover how to become rich, even if you’re not racking up debt. Spending every penny you earn is one of the biggest financial mistakes, especially for younger adults, because you don’t get off to a sound financial start in life.“
After young folks finish their formal education and find jobs that they truly enjoy, they should strive to live a lifestyle that’s well below their means,” said Timothy G. Wiedman, a retired associate professor of management and human resources at Doane University. “If they live well below their means, they can quickly retire their student loans while paying off any credit card bills they accumulated getting started in their new professions.”
6. Having Just a Single Income Stream
We live in a gig economy, and everyone has a talent. So you’re making a financial mistake if you’re not capitalizing on your skills to make extra money.
“Not having multiple income flows is a mistake,” said Joe Bailey, a business development consultant with My Trading Skills. “To build wealth sustainably, you need to have income flowing in from different sources. Lacking multiple sources of income is often a handicap to strategically building one’s wealth.”
Sell craft items on Etsy, flip secondhand merchandise on eBay, drive for a rideshare company or walk dogs. Any of these side gigs is a brick on the road to becoming rich.
7. Not Taking Advantage of All Your Employer’s Benefits
Big employers typically provide benefits like vacation time and health insurance. But you’re making a financial mistake if you don’t take advantage of their extended offerings.
For example, some companies pay for gym memberships or have employee assistance programs that offer free counseling sessions, referrals to child care or elder care, financial counseling and legal referrals. If you want to know how to become rich, find out your benefits and take advantage of them so you don’t pay for important services you could get for free.
8. Keeping Too Many Subscriptions
It’s so easy to subscribe to apps, streaming services, shopping clubs and various other services that you probably don’t need. That’s a financial mistake, as is forgetting to cancel them.
“Review your monthly recurring charges and see if there are any services you are not currently using,” Straub advised. “Perhaps you really only watch Netflix but still have a Hulu subscription from that one time there was a documentary you wanted to watch. Or maybe you have a full cable package but only watch HBO, which can be easily added to your Amazon account for a minimal fee. If you aren’t using it, you don’t need it and will not even notice when it is gone.”
9. Undervaluing Yourself
Many people are uncomfortable tooting their own horns, but not doing so in the workplace is a big financial mistake.
“A lot of us, particularly women, enter the workforce ill-equipped for salary negotiations and often give away our skillsets for less than they’re worth,” said Stephanie Bousley, financial consultant and author. “Forget about median salaries for your city and focus on what you are worth."
She added, “We create a lot of invisible boundaries to earning more money at our jobs: no one is getting a raise this year, don’t want to ruffle any feathers, we’re downsizing, there’s a ceiling for people with my title, etc. Try to forget about these excuses and focus on only what you are bringing to the table.”
10. Drinking Excessively
Drinking too much is bad for a variety of reasons, including its impact on your finances.
“Money spent at a bar is money never seen again, plus some of us make further bad choices after drinking, like internet shopping in a blackout, ordering $400 worth of Chinese food — you get the picture,” Bousley said.
It’s a financial mistake to spend big bucks on liquor when those funds could go into your savings and wealth-building plan.
11. Making Excuses
Finally, one of the biggest impediments when you’re wondering how to become rich is making excuses when you know the steps you need to take.
“No matter what your income is or what your outgoings are, your attitude towards money will make one of the biggest differences as to whether you will save or not,” said Holly Andrews of KIS Financial. “If you keep making excuses as to why you’re not saving money and why you’re purchasing certain things, you will find it very difficult to get into the mental habit of saving money.”
If you’re facing this mistake, she advised seeking professional financial advice and getting help with making a budget and savings plan.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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