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10 Money Mistakes Successful People Don’t Make

10 Money Mistakes Successful People Don’t Make

Managing money effectively is a key success skill. Successful people make the decision to become effective with money, many of them early in life. Like any area of life, it is important to educate yourself about the threats and challenges in the world. Taking the time to master a few key principles will pay off for years to come.

1. They don’t overspend; they live on less than they make.

Living on less than you make is an essential money management skill. Some of the world’s wealthiest people have taken this principle to heart. For example, Sir John Templeton, a legendary investor who became a billionaire, saved 50% of his income even when he grew up with limited means. If that is more than you manage, don’t worry! You can reach financial success by saving 10-15% of your income.

Tip: Learning to live on less than you earn takes time. Start by looking for ways to save money: 55 Practical Ways To Save Money Efficiently.

2. They don’t fixate on price; they understand the importance of value.

The price you pay for an investment, a meal or piece of clothing is only part of the story. Successful people also think about the value of that good. For investments, they consider the prospects for the investment growing in the future. For personal items, they look for high quality products that will last. For example, a well made pair of business shoes may cost $200 or more but these shoes can last for years with proper care.

Tip: Buy high quality products that will last for a long time.

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3. They don’t waste cash on fees and interest; they know how to manage their banking

Carrying a balance on your credit card is incredibly expensive and sadly common. According to CNN, the average American household carried over $15,000 in credit card debt. Successful people also keep an eye on their bank fees–how much they pay for ATM use and other transactions. These fees are easy to avoid with planning once you understand how the system works. Simply reviewing your financial accounts for 5-10 minutes each month is all it takes to understand your fees.

Discover: 7 Essential Ways To Avoid Unnecessary Bank Charges.

4. They don’t forget to adjust their finances after big changes in life.

Did you get married recently? Is your spouse referenced in your will? These are some of the points that financially successful people manage effectively. While you can automate a great deal of your finances, it is vital to make adjustments when your life and family circumstances change significantly. Sitting down by yourself (or with a financial expert) at least once a year to review your life and financial plan is an excellent way to stay on top of important changes.

Learn: Arrange your finances for the long term with estate planning.

5. They are not satisfied with a stagnant income; they look for ways to increase their income.

Some people never ask for more money or simply settle for 1-3% increases. Unfortunately, that rate of income growth means you are simply standing still–inflation is slowly eating away at your purchasing power. Instead, successful people look for ways to earn more income. Increased income gives you more options for personal enjoyment, more capacity to give money, and a sense of security.

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Successful people take daily action to increase their income. For example, they take a course to improve their skills or they contribute ideas to improve the productivity of their companies. They also know how to ask for more money.

Tip: Do yourself a favor and learn about high paying fields: earn $100,000 in project management and discover the highest paid jobs in America.

6. They don’t ignore financial statements.

Reaching financial success requires some slow and steady habits. That includes forming a habit to monitor your financial statements. Successful people set a time each month–30 to 60 minutes–to review all of their financial accounts: investments, bank accounts, credit cards and more. When they detect an error or omission, they take immediate action.

Tip: Set a recurring reminder in your calendar each month to review your financial accounts.

7. They don’t take foolish risks in money.

Warren Buffet is often quoted as saying, “Rule number one is never lose money.” All investments carry some measure of risk (and therefore the potential to lose money). That said, successful people use two powerful tools to avoid losses. They understand the value of insurance to control risk (e.g. home, auto, and life insurance) and the importance of asset allocation.

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Remember: If it sounds too good to be true (or if you don’t understand how it works), slow down and start asking plenty of questions.

8. They don’t pretend to understand everything when it comes to money.

The world is a vast and complex place–successful people know and deeply understand this truth. When it comes to money, there is a lot of information out there. That’s why successful people like Warren Buffet understand their limits and focus on their strengths.

Tip: Review your knowledge of money and investments. If you are just starting out, read one or two classic personal finance books. Or read 9 Can’t-Miss Secrets Behind Warren Buffett’s Wealth for more insights from one of the world’s most successful investors.

9. They don’t transfer responsibility to experts.

Successful people do seek out the advice of experts, yet they never yield responsibility. For example, it is reasonable to seek advice from a tax accountant in planning your financial affairs. However, successful people take the time to ask questions and evaluate the person providing advice to them.

Tip: When seeking advice from professionals like accountants and lawyers, ask questions and seek to have the advice explained to you. Otherwise, it is difficult to act on the advice.

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10. They don’t let the pursuit of money overcome other values.

Seeking financial success is a valid goal. Significant financial resources give you more options to give to causes you believe in. It also means improved access to technology, health care and leisure. However, successful people understand that financial success is only one aspect of a successful life. For example, neglecting health in the pursuit of money is a poor strategy.

Tip: Review your personal goals to see if you have a balance between financial goals, career goals, family goals and other activities.

Featured photo credit: Money/martaposemuckel via pixabay.com

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Bruce Harpham

Bruce Harpham is a Project Management Professional and Founder and CEO of Project Management Hacks.

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Published on September 17, 2018

How Being Smart With Your Money Leads to Financial Success

How Being Smart With Your Money Leads to Financial Success

Achieving financial success is not something that just happens. Maybe if you win the lottery or something, but for the average person like you or me, it comes from a series of small steps you take over a long period of time.

With each step, you form a new smart money habit. And with each smart money habit, you build towards financial independence.

So what sort of habits can you form to get on that path? Let’s take a look at smart money habits you can start today to get you closer to a financially independent future.

1. Avoid being “penny wise but pound foolish”

It’s tempting to try saving a couple cents here and there when buying small items. However, that’s not where the real money is saved. You’re putting in extra effort for something that doesn’t move the needle.

You get the most bang when you’re able to cut down on your bigger bills. For example, finding a lower interest rate for your mortgage could save you $50+ per month. And cutting your transportation bill by purchasing a cheaper car or taking public transportation can provide large gains as well.

So, look at your recurring expenses such as housing, transportation, and insurance, and see where there’s wiggle room. It’s a much better use of your time than trying to pinch pennies here and there on smaller purchases.

2. When you want something big, wait

Impulsivity can get you in trouble in most aspects of life. Finances are no different.

It’s human nature to see something and want it right then and there. It starts as a kid in the checkout line at the grocery store, and it continues on through adulthood.

We get an idea in our head of something we want, and it’s hard not to go out and get it right then.

A good example is wanting a new car. Perhaps you’ve had your car for several years. It’s crossed the 100k mile mark. Maybe maintenance is due, and you’re annoyed that you need to replace the timing belt or purchase new tires.

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So, you get the itch.

You start digging around online, and you realize you could trade in your current car for something newer and more exciting… all for a few hundred bucks a month. Then you get obsessed.

Here’s where you have to take a step back.

Your newfound obsession is clouding your judgement. Rather than giving into the impulse, wait it out.

Set a timeframe for yourself. Maybe you come back to the decision three months down the road. See if the obsession lasts.

It might, but often, a funny thing happens. Often, you forget about it. And often, you find that the new car wasn’t a need at all.

The impulse faded. And you just saved yourself a ton of money.

3. Live smaller than you can afford

You finally get that big raise. And you want to celebrate – and why not?

You’ve been looking forward to this forever. And after all, it was all due to your hard work.

That’s fine, splurge a little. However, make it a one-time deal and be done.

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Don’t get caught in the trap that just because you’re now making more money, you should spend more.

Too often, people get more money and feel like they that gives them the means to buy a bigger house, a bigger car… you know the drill. Resist.

The fact is that living smaller than what you can afford is one of the fastest ways to build savings.

But if you constantly upgrade as you begin to make more, then you’ll never get ahead. You’ll just build up more debt along the way and have just as little wiggle room as before.

4. Practice smart grocery shopping

Food… it’s one of the biggest portions of any budget. And if you’re not careful, it can be one of the biggest drains on your wallet.

But luckily, there are a few things you can do to ensure that you stay smart with your money when buying groceries.

Create a grocery budget

Set a strict weekly grocery budget. When you know how much you can spend on groceries, you can then plan your weekly menu around it.

Once you know what all you need, you can go shopping and keep a running tally as you shop to ensure you’re on track.

I tend to do this in my head, rounding for each item. However, writing it down as you go would probably work best for most people.

Make a list… and never deviate

Never go to the grocery store without a list. If you go to the store with a ballpark idea in mind, you don’t have a true ide of what you need.

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You’re not well-researched. You don’t know what the sales are. As a result, you’re going to make decisions on the fly.

These impulse decisions will lead to overspending, which will derail your grocery budget.

Eat before going grocery shopping

It’s also important to eat prior to going to the grocery store. Hunger is a powerful force.

If you’re shopping on an empty stomach, everything is going to look good. In particular, you may find a lot of ready-made, processed snacks will look enticing.

After all, you’re hungry now and that food is easily available. So subconsciously, you may lean towards those items.

Unfortunately, not only are those items typically less healthy, but they’re likely more expensive. You pay for convenience.

However, when you eat prior to shopping, then you’ll shop with a clear mind. Your hunger won’t cloud your judgement, influencing you to make poor decisions like a cartoon devil resting on your shoulder whispering in your ear.

This makes it much easier to stick to your grocery plan.

5. Cancel your gym membership

Now that you’re all set on your food, it’s time to get smart about managing your budget in terms of physical fitness. And let’s begin by avoiding the gym. The gym bill, that is.

The average gym membership costs around $60 per month. That’s $720 a year.

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Yet, two out of three gym memberships go unused. That means two-thirds of people who have a gym membership are literally giving away almost a thousand bucks a year. It’s crazy!

I recommend seeking an alternative. One good alternative is to look into fitness streaming services.

Streaming services allow you to stream hundreds of workouts like Insanity and p90x, right in your own home for around $10-20 a month. That’s $40-50 less a month than the average gym membership.

Of course, then there’s the free option. The internet is full of free workouts that you can do on your own with minimal or no equipment.

For example, there’s the Couch to 5K program, that I personally used a decade ago to ease myself from couch potato to running my first 5K race. If I could do it, anyone could.

Then there are free resources like reddit that have limitless information on workouts. The Fitness subreddit has done all the research for you, populating workout tips and detailed workout routines for anyone to use in their wiki.

There are several routines that require no equipment. And you can join in on the subreddit to become part of the community, making it easier for those seeking comraderie and encouragement in their fitness goals. All for free.

It’s baby steps… And baby steps can start now!

I’ve never met anyone that can’t stand to be a bit smarter with their money. And on the flip side, anyone can get smarter with their money. But remember, it doesn’t happen all at once.

Begin by fighting your impulses. Prepare for the week and be smart at the store. And cut monthly expenses like gym memberships that are overpriced and you probably aren’t getting your money’s worth out of anyway.

The devil is in the details. And the details can change your lifestyle and prep you for a financially independent future.

Featured photo credit: Unsplash via unsplash.com

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