Top 10 Mistakes People Make With Their Money

Because these mistakes are so critical, they are nothing to laugh at. Have you made one or more of these mistakes with your money?

1. They haven’t worked out the amount of money they actually need every week to do better than just pay their bills. They don’t have a budget set up.

The correct definition of a BUDGET is: the calculation of the amount of money needed for an organization to function and achieve its purpose. If you are happy with just being able to pay your bills, and you don’t pay yourself first into a savings plan, you’ll stay poor while you make your vendors rich. Each vendor that you pay is running their business to make a profit. Shouldn’t you be running your business to make a profit? Your income target must include enough profit or the enterprise will go broke and fail.

2. They don’t work out ways to make more income than they need, and then be willing to do whatever is required to execute their plan.

By UNDER estimating the amount of income needed to exceed breaking even, they almost always set their income target too low and lose money existing on credit instead of going into action to raise their income. Anyone can discover different ways to make more money; it is often the ‘willingness to do whatever it takes’ that seems to be the problem.

3. They habitually spend more money than they make.

Using your income to purchase the ‘appearance’ of having wealth is a dangerous activity. I call this type of spender a Gratification Groupie. It can catch up with you fast and eventually can drown you in debt. This situation causes constant worry about money and brings on lots of sleepless nights. Money does not buy happiness. However, doing something worthwhile and productive and knowing you are appreciated for it will make you feel like you are on top of the world.

4. They don’t work out what they need to buy in the future and set aside a little money every week so they can pay cash for the purchase later.

Buying something with a credit card because you are short on cash is committing your future production to the credit card company. You are then in economic slavery to the credit company. The correct method to purchase things, especially high dollar items, is to put away a small amount every week till you have enough cash to buy the item, and then negotiate a big cash discount. The guy with the CASH IS KING!

5. They purchase services and products based on WANT rather than on NEED.

Purchasing decisions should be based on how your purchase of the service or product can assist you to produce more income for you. Honestly, do you want the new cell phone that offers email retrieval and text messaging because your friends have one, or do you need it to work more efficiently because you are traveling to close the next business deal?

6. They don’t contribute to a retirement savings plan so they have it for use later in life.

Are you counting on the younger workers’ future production to supply you with Social Security income when you stop working? Boy, that is a huge gamble! Even though our government says the annual cost of living is rising 3 - 3.5% a year, the real figure is 8 - 12% a year. You have to make that much more income just to break even. Why does the government report that it is only 3 - 3.5%? Regrettably, it’s because the government has to increase Social Security payments every year by the percentage they report. The Social Security system is already bankrupt and those living on Social Security alone are going in the same direction.

7. They don’t build up multiple sources of income. If one source disappears they are in financial trouble.

The old saying ‘don’t put all your eggs into one basket’ is true today, especially in terms of income sources. Research profitable services or products you can add, or business ventures you can participate in that are ethical, and have a really good opportunity to producing a residual income.

8. They get stressed out about how little interest their bank pays on savings accounts while they are being murdered with much higher interest rates by carrying balances on their credit cards.

If you have high credit card debt, it is more advantageous to use excess cash to pay down the debt and stop the high interest payments rather than attempting to earn interest from the bank. As you pay off your debt, you should also keep sufficient cash on hand to cover a few months of basic living expenses. Once the debt is gone, or will be soon, then start investing the excess cash in investments that return real growth.

9. They worry about ‘the economy’ in general.

I’m amazed that most people are actually more worried about ‘the economy’ than about their household or business failing financially. They worry about what the media is reporting about ‘the economy’ when that is something they can’t control, while never looking at how they can affect the economy of their own household or business, which is what they CAN control. A rise in unemployment is no cause to worry. Small business’ creation of new jobs far outweighed the loss of jobs in big corporations, according to the latest ADP report. A failing bank is no reason to panic. Banks receive funding for bailouts from the FDIC and other investors. Nobody is standing by to bail out your failing business. That is entirely up to you. So keep promoting your business, put aside some money, and sleep like a baby while the bad news about ‘the economy’ rages around you.

10. They anticipate surviving financially without taking full responsibility for controlling their financial future.

Money problems have a simple solution. Cut expenses, increase your income, and correctly manage the money you bring in. It’s not only about how much money you make, it’s what you do with it that determines your financial condition.

Correct money management is something educational institutions don’t teach. People receive false information and bad advice about how to handle money. Then they make silly mistakes, get into worse trouble, try to solve the problem using credit, create more trouble, and then go searching for debt relief.

Fortunately, there is an inexpensive, proven, money management software system that can reverse the money management mistakes a person has made in the past, and keeps them from making the same mistakes again. It is an old-school system your great grandparents used before the days of credit cards. Very wealthy people know and use this system today.

Sandra Simmons, President of Money Management Solutions, Inc., has years of experience helping company owners and individuals manage their income to achieve financial freedom. To learn more visit www.moneymgmtsolutions.com

- Sandra Simmons