Common money mistakes made by young professionals – and how you can fix them
I met a new client the other day and it got me thinking about some of the most common mistakes people make when getting started with their money strategy.
If you fall into these common traps, you might be earning a solid income but will always struggle to make real progress. These traps can mean it’s hard to gain traction when you invest, end up paying too much tax, and miss out on opportunities to get ahead faster, which can mean your lifestyle will always held back your income.
Avoid these issues and you’ll get on the fast track to success with your money, you’ll have better cashflow, cut your tax bill, boost your investments, and gain a clear path from where you’re at now to where you want to be in the future, while living the sort of lifestyle you want along the way.
Mistake #1 – Not thinking about your targets
Imagine you’re an olympic archer in the final heat of the gold medal round, you draw your bow and start to line up your arrow… This is the shot that will decide if you take out the gold medal and move into the history books, or bumped to fourth place and possibly forgotten. You look up to aim, and ahead of you… nothing! Without a target, it doesn’t matter what skills you have or how much you’ve prepared – you’re never going to end up where you should.
It’s the same when it comes to your money strategy, if you don’t know where you’re headed or what you’re aiming for you can’t expect to make the right decisions. It could be your next big holiday, buying your first property, or even quitting the 9-5 – knowing what you’re aiming for is a huge motivator and the first big step to making real progress. Think about what you want today, next month, next year, and beyond, because this should drive the decisions you make today.
Mistake #2 – Not understanding what’s possible
If you start heading down a path without getting clear on your options it can mean you miss opportunities, run into roadblocks that slow you down and hold you back, and always have that feeling there’s something more you can be doing to more out of your situation.
When you know what your options are, you’re in a more solid position to make the right money decisions. Take the time to do some research or get good Advice to understand what’s possible for you so you take the very best path – based on what’s most important to you.
Mistake #3 – Not managing risk
When getting started with your money strategy building initial momentum is hardest, and if you don’t manage your key risks there will always be gaps. You’ll lack confidence, have doubts, and you run the risk of serious problems that could destroy your momentum and set you back. Manage your risk properly and you’ll be able to get on with getting ahead knowing your key risks are managed.
At Pivot we think lifestyle risk is the most important risk most young professionals and small business owners face in their strategy. Lifestyle risk is where you make money decisions that have a negative impact on your lifestyle (and money strategy) into the future. Sadly too many times I’ve seen people make decisions without thinking about what might change in the future and the impact the decisions they’re making today might have on their future money situation. Don’t make this mistake! Take the time to understand and manage key risks before making any big decisions.
Mistake #4 – Not making it easy
Let’s face it, we’re all time poor. This means when setting up your strategy you need to make it easy for yourself. If you don’t, executing your plan be confusing, complicated, and importantly really time consuming. If you get this right, you can effectively automate your success, everything will flow, and it’ll be simple for you to check on your progress and keep yourself motivated.
Take the time at the front end to set yourself up in a way that’s easy to manage and track. Automate savings and investments, outsource where you can, and make sure you can check on your progress easily and quickly.
Mistake #5 – Trying to do it all yourself
I get that DIY shows are super popular these days, but without the right skills, knowledge, and experience if you try to do everything yourself when it comes to your money strategy it’s easy to run into serious trouble. Apart from missing out on opportunities and running into problems that will hold you back, you can make decisions that are difficult and expensive to unwind, which can set you back for years. Also without using a professional as a sounding board, it’s difficult to get real understanding and confidence in your money strategy and financial direction.
Get the right help and you’ll have someone on hand to help when making your big decisions, get more clarity and confidence in what you’re doing, and opportunities will be brought to your attention so you get better money outcomes from your strategy. Know what your options are when it comes to getting Advice and who you use to help.
Mistake #6 – Not learning enough
If you don’t understand enough about the areas of your money strategy and how they fit together, you’ll always doubt what you’re doing is the absolute best thing for you. If you get educated around your strategy and the reasons why the direction you’re considering is perfect for you, you’ll get what I think is the most important thing when it comes to your money – a clear path from where you are today to where you want to be in the future, and absolute confidence in your money strategy and financial direction.
Now I don’t mean you need to go and get a degree in economics or taxation, but you should understand the key benefits and risks involved in your strategy and your most relevant alternative options. You can do this by speaking to friends/colleagues/family, researching online, or using a Financial Adviser that focuses on education as part of their process.
Getting started with your money strategy can be confusing, overwhelming and sometimes downright hard… But it doesn’t have to be. Avoid these common mistakes when setting up your money strategy and you’ll set yourself up to get ahead faster and easier.
Ben Nash is Director and Founder of Pivot Wealth, a Financial Advice and Education firm that helps young professionals, executives, and business owners make smart money decisions and create lifestyle options. Pivot run a range of short money education workshops through Work-Shop.
This article was originally published on the Work-Shop blog.
Review: The Big Bruise @ Montague Basement Written by Claire Deakin Photography by Omnes Photography The Big Bruise is not one to mince its words (or visuals,… Read More