Mobe Matt Lloyd :Why does the rich keep getting richer when everyone else seems to be plummeting into a financial black hole? Is it an inevitable destiny that you just have to accept and learn to live with? Not quite.
The biggest secret as to how rich people continuously grow their wealth lies in their money management skills. Many successful people attribute their wealth to actively and effectively taking control of their finances. They adopt the habit of budgeting and planning for their expenditures and are diligent in keeping to it.
The good news is you can also learn to be in control of your finances, and you can start by avoiding these six common financial mistakes that rich people stay clear of.
1. Not Investing in Yourself
The most profitable investment you can make in life is investing in yourself. Your time and money should be primarily spent on improving your knowledge and skills before you can hope to make a success in other investments.
Successful people never stop learning. They buy books and materials that will help enhance their skills. They attend seminars and seek expert advice to better their expertise. They have a portion of their earnings strictly dedicated to educating and improving themselves. In his book “No Excuses: The Power of Self-Discipline,” Brian Tracy advises investing 3% of your income back in yourself to grow your earning ability.
You can never grow if you don’t learn new things. Your income, mindset and approach towards money will stay the same, and you will keep falling deeper into debt and financial difficulties if you’re not careful and knowledgeable.
2. Buying Cheap
In efforts to save money, most people will buy the cheapest option available. Granted, it saves you some money at that moment, until you have to replace your purchase three months later. Good quality goods don’t usually come cheap, and cheap goods don’t last long.
Think long-term investment when making purchases for everything from a simple pair of shoes to your family car. In the long run, you will save a lot more money buying quality stuff, you will get a good user experience, and you will probably save yourself the time spent on looking for cheaper products.
3. Living outside Your Means
Fake it until you make it. That is probably one of the worst financial advice anyone can ever give. You should never fake having a lot of money. Spending ridiculous amounts of cash on luxurious brands and entertainment sprees, especially if you’re using lots of money you don’t have, will lead you to mountains of credit card debts that might take you years to get out of.
While a lot of people’s expenditures greatly exceeds their earnings, rich people live on less than they earn. This is an essential money management skill that will help you increase your savings every month. Assess your monthly expenses and cut down on those things you can live without. Adjust your budget to, at most, 80% of your income, and stick to spending only that.
4. Wasting Money on Fees and Interest
Buying on credit is costly. There are high fees and interests that come with maintaining a credit card. Some banks charge as high as 20% or more, thus, you end up paying more money than you spent, which is money that could have gone into your savings.
A lot of people also have a habit of paying their bills late or paying only the minimum amount. Late payments may incur extra charges that you don’t need; which wastes your money, and the longer it takes you to pay your bills, the higher interest you’ll have to pay.
5. Staying in a Stagnant Income
Some people get too comfortable with their financial situations. They learn to make do with what they earn and hardly ever make an attempt to improve their income. Price hikes, increasing taxes and other economic situations keep rising no matter how stagnant your income is, which could slowly eat away your purchasing power. This eventually leads to spending on credit and only worsens your financial situation.
Rich people are never satisfied with a stagnant income; they are always thinking of ways to supplement their earnings. They diversify their income through investments and business endeavors, and avail savings accounts with high-interest rates. Furthermore, they improve their skills and expertise so that they can have the leverage to ask for salary increments, or develop their products and services to raise prices.
6. Saving Last
When ordinary individuals see some money in their bank account, most of them immediately think of what they could spend it on. They allocate the money to various expenses they believe they need and only save whatever is left, which is usually very little or, sometimes, nothing at all.
Rich people, on the other hand, study their finances, calculate where their money needs to go, and then put away the savings money before allotting the rest to expenses. They plan budgets based only on the money they have after saving, and they avoid impulsive buying. They never make spontaneous withdrawals from their bank accounts, and if they must cash out, they find ways to earn money to replace it.
None of the points mentioned above have anything to do with the amount of money you already have, but everything to do with your financial control and a positive mindset towards wealth. Put your efforts in taking control of your finances, and you will enjoy a stable and prosperous life.