Have you ever wondered why successful people are, well, successful? One of their most important success skills is effective money management, which is something they generally learn early in life. The things they do that make them successful at money management are all pretty straightforward – do have an emergency fund, do save money, do budget, do save for retirement t and so forth. But something that is equally important in being financially successful is the “don’ts” or the money mistakes to not make. Here are nine of those mistakes that successful people just don’t make.
1. They don’t obsess on price
How much you pay for a sweater, a meal or a computer is only a piece of the story. Successful people don’t obsess on it. They also think about the value of what they’re buying. In the case of an investment, they look at the prospects for future growth and not just what’s happening this year. In the case of personal items such as clothes, they shop for high-quality products that will last for many years. The same is true when buying shoes. They understand they may have to pay $200 or more for a well-made pair of business shoes but understand that with proper care they will last a lot longer than a pair that cost $50.
2. They don’t make the mistake of overspending
Successful people always live on less than they earn. This is true even when they’re living on limited amounts of money. For example, the legendary investor Sir John Templeton saved 50% of his earnings even when he was making very little money. He is now a billionaire. You don’t have to scrimp to do this either. If you save just 10% to 15% of your income you can easily achieve financial success.
Did you know that according to CNN the average American household has more than $15,000 just in credit card debt? Carrying these kinds of balances can be incredibly expensive. Successful people just don’t do it. They pay off their balances at the end of every month. They also watch out for bank fees such as how much they are charged to use the bank’s ATM’s and the cost of other transactions. All you need to do is sit down and review your financial statements for 5 to 10 minutes to see what those fees are costing you and what you would need to do to avoid them.
4. They don’t settle for a flat income
Are you afraid to ask for a salary increase or are you willing to settle for a raise of 1% to 3% every year? Given today’s rate of inflation a raise of 3% will keep you just standing in place and anything less than that will have you falling backwards in terms of your ability to buy goods and services. What successful people do is look for ways to increase their income or to earn more money. When you earn more money this gives you more options for personal enjoyment, the ability to donate money to your favorite charity and a heightened sense of security. What successful people do to increase their income is take courses to improve their skills or to contribute ideas to their companies as to how it could increase its productivity.
5. They don’t ignore their financial statements
If you want to achieve financial success you need to have some good, solid habits. This includes the habit of monitoring your financial statements. Successful people generally set time aside time each month – maybe 30 to 60 minutes – to review all of their accounts. This would include their checking account statements, their credit card bills, investment statements and so forth. If you do this and find an omission or error you can jump on it and take immediate action to correct the problem.
6. They don’t take foolish risks
That Oracle of Omaha, Warren Buffett, has often said his rule number one is, “never lose money.” It’s true that all investments carry some risk and therefore the possibility of losing money. However, successful people have two tools they use to avoid losses. First, they have automobile, health, home and life insurance to manage the risks associated with them. They also understand the importance of asset allocation, which is a fancy way of saying they invest in a variety of different assets. BTW – if you’d like to know more about asset allocation here’s a video, courtesy of National Debt Relief, that explains it.
7. They don’t believe they understand everything
Successful people know that the world is a vast and complicated place. They understand that when it comes to money there is a lot of information out there and they don’t pretend that they understand everything. People like Warren Buffett know this and understand their limits and focus on their strengths. You don’t have to know everything about every stock or mutual fund in the world but you do need to know everything you can about the ones you choose to buy. Otherwise it’s like that old saying that even a blind hog will find an acorn once in a while. If you stumble around buying a lot of stocks or mutual funds without doing the proper amount of research you’ll eventually find a winner but you’ll waste a lot of money in doing so.
8. They don’t shift their responsibilities to experts
Successful people are always eager to get the advice of experts but they never yield their responsibilities. As an example of this it can make sense to get advice from a tax accountant in planning your finances. But successful people take the time to ask questions and to evaluate the experience and the abilities of the person from whom they are getting advice. Also, if they don’t understand something they are not afraid to have it explained.
9. They don’t let their values get lost in the pursuit of money.
Being successful financially is certainly a very worthy goal. It generally means you would enjoy better access to health care, technology and leisure activities. However, people that are successful know that being successful financially is just one part of the successful life. For example it’s not a good strategy to neglect your health in the pursuit of money by consistently working 70, 80 or more hours a week. It’s important to have your personal goals in writing and then sit down and review them periodically to ensure you’re maintaining a healthy balance between your career goals, financial goals and family goals.