Your paradigm for money needs to change. That’s what this is about. Money is not something to hoard, nor is it something to waste away as soon as you get it. The only value money has is the value that we as humans give it, and in that value we give it, we allow it to control our lives.
As I came to realize this, I discovered that I had viewed money incorrectly my entire life. I had always been great at managing the little money that I had, but I never fully understood why I am working so hard for something that I had so little of.
Economists estimate that only 8% of the money in existence is actual cash. What does that tell you? A large majority of currency is only hypothetical, and how can you let something that does not exist have any control over you?
Instead of giving your power to the almighty dollar, I wish to share with you six common money mistakes and how I have corrected them in my own life to help manage my own finances. I share them in hopes that they will help inspire you to do the same.
Not Having a Correct View on Money
This is the first mistake that you are making. You are viewing money as something that controls your life, not as something that you are in control of. You think that I am wrong?
You are afraid. Afraid that your parents may not have enough to retire. Afraid that you have too much debt to pay off. Afraid that every day your boss might fire you or that you might get laid off. Money should never be the source of fear. But for you, it is.
The only stranglehold that money has on us is the one that we allow it to have. Money is a human construct and it is the most powerful tool that we have ever created. It controls lives, moves the world forward, and can change the course of history. Right now it is controlling you. But that ends. Now, you must control money.
You can learn to understand that the idea of money is nothing more than an object to further you in life. You use it to get what you want, to ease the suffering of yourself and others, and to get you closer to your dream or desire. That is all it is.
Not Making Your Money Work for You
The second mistake you are making is not using your most powerful tool the correct way. If I handed you a hammer, would you use it to screw in a screw? Of course not. You would go and grab a screwdriver instead. So why is it when you are handed your paycheck, that you spend your money on things you don’t need, place it in an account that gets .001% interest, or you don’t invest it in your future?
You need to make your money work for you. You worked for it, so why waste it? When you get a paycheck, you probably think, phew, I have some money to go spend. What you need to think is, alright I just worked and was given a tool in return. What can I do with this to make more money? Or, what can I do with this to secure a safe and bright future?
This is where it gets fun. Use that micro-fortune from your paycheck to get you a return. Open up a brokerage account and invest. Start a company and use your proceeds from work to fund it. Loan out the money you now have to others and charge them interest.
The options are endless. It all starts with you deciding to make a financial change.
Not Taking Risky Decisions (Hint: They Are Good)
Mistake number three is that you never take any risks or chances with your money. This one sounds a little counter intuitive, but it can be the difference between retiring at 60 or at 30. And no, taking a risk does not mean buying a lotto ticket.
Taking a risk means doing something that you would not normally do. Whether you are 20, 30, 40, or 50, you can always allocate a little extra cash to take a risk. That could be investing in a speculative stock, giving your friend or family member an investment to start a business, or even starting your own company. Most will advise against taking a risk, but those who never try will never have the opportunity to be wildly successful.
If you want to try your hand at day trading and investing, Robinhood is a new service that is starting to launch. They offer zero commission day trading, something that has never been done before.
Not Defining What Your Financial Goals Are
Your fourth mistake is failing to decide what you want in life financially before you act. This might be the most important step as well. If you do not know what you want, then how can you expect to reach your goal?
Do you want to retire at 65? Do you want to travel the world and be able to live off of a passive income at 35? Do you want to be a millionaire, or do you want to live comfortably and happily? All of these are decisions that you will have to make as you continue to grow and plan your future. I have found that Business Insider has a list of ten great financial tools to use to assist in planning, so I suggest that you check them out to help you along.
Also, you should be tracking your goals using some sort of software. Mint is the best free resource for this. They allow you to see exactly what you spend across all of your accounts, and budget and plan for your future. I use them and I highly recommend you do as well.
Buying Things You Don’t Need
This is a problem that I think all of us have. But one of the ways to have more money is to not spend so much of it. Just as money comes in, money goes out. You would be surprised what you spend each month, and how many costs you could cut or completely remove. Do you need to buy a $5 Starbucks each day? If you go to Starbucks 7 days a week, that’s $35 dollars a week, or just over $1,800 a year.
How often do you eat out? Can you start to cook your own meals? Or are you a person who does a lot of impulse buying and window shopping?
The world is full of material things that we do not need. Instead of buying stuff, we should be doing one of three things: saving, investing, or buying experiences. The one thing that I will always advocate buying is an experience. Vacations, a new activity, something that will create a memory—such experiences are always worth it.
Not Paying Yourself First
The sixth mistake that you are making is not paying yourself first. When you receive your paycheck, if you are a responsible person you are likely thinking of how you can pay off some type of debt. Maybe a student loan, your mortgage, a credit card or two from the holidays. But the opportunity cost of money invested cannot be overlooked.
You should take 10%, 25%, even 75% of your paycheck and pay yourself first. Make those investments, contribute to your retirement account, or start your business. The longer you put it off, the longer it will take for you to grow your nest egg and get you that one step closer to your financial goals.
Whatever you can afford, you should be paying yourself first. Then you are truly making your money work for you, and not working for your money.