Eight Financial Failures that Could Ruin Your Future
We cannot avoid failing sometimes, but failing to do those obvious things that ensure a good future is avoidable; it requires acquiring the knowledge needed and then disciplining ourselves to take the right actions. Below are eight failures that must be avoided if you want to have financial freedom when you reach retirement age rather than having to depend on government handouts or having to continue working barely making ends meet.
1. Failing to Save for Retirement
It is a major failure not to start saving at a young age for retirement. It is extremely difficult to catch up if you delay saving until you are older. Although many do save for retirement, there are also many who have as little as $11,000 saved at the age of 74. It does not require depriving yourself to save. If you start young, just 10% of your earning saved will amount to a large amount by retirement. The average starting pay for a high school graduate is $34,000 and $55,000 for college graduates. Paying yourself $100 per week and investing it in something like S & P 500 can earn a return of 11% or more. That is just an example, not a recommendation. It is important to research the best place to invest your savings. Employee retirement plans, IRAs or other investment accounts can assure that you will have a comfortable retirement.
2. Failing to guard against Too Much Debt
The average credit card debt is $6,469 — a 4.4% increase since May 2022. Interest on credit cards can range from 17% to 29%. It could take a very long time making minimum payment to pay off a debt that size. Late payment charges can be as much as $30.
It is so easy to fall into the debt trap if you are drawn in by not being careful about how you handle your credit card. The best policy is not to charge more than you can pay at the end of the month. If you have a card that pays back in cash, you can gain severl hundred dollars over time by using your card but only if you pay it off each month before interest is added. Failure to pay on time can ruin your credit and limit your use of credit when you really need it.
The best way to handle credit is to budget a debt-to-income ratio. Don’t ever borrow more than you can afford, which can use up money you should be saving and investing. If you are heavily in debt already, you might consider a non-profit credit counseling service to help you to create a way to become debt free.
3. Failing to exercise and having a healthy diet can ruin your health.
It is worthless to save for retirement if bad health keeps you from enjoying your financial freedom. Following good rules of health should be your highest priority, but for many it is among the last. Regular checkups and following preventive care are of an essence if you want to stay healthy. Poor lifestyle choices are the greatest hindrance to good health, like smoking, failing to exercise on a regular bases, and a poor diet. Ignoring your heath can lead to inability to do the thing you would like to do, lead to excess medical bills, and a shorter life-span.
4. Failing to Protect Your Assets
Sometimes millionaires go from wealthy to broke. Sometimes it is of no fault of their own, but other times it is because they failed to protect their assets. Negative events do happen in life and when they do, we need protection to save our assets.
The most important way is to know how to invest money and where to invest it. Some have lost their fortunes by investing with shady characters who stole their money. Other times it is because they put all their eggs in one basket and lost it all. A smart way to protect assets is by having the proper insurance on real estate, life insurance, disability insurance, etc.
5. Failing to have a plan before quitting a Job you hate.
Don’t just up and quit your job before you have a fallback plan. Quitting before you have a plan can put you in dire financial territory especially if you are living from paycheck to paycheck. Having to take the first job offered to you may be like jumping out of the skillet into the fire. The object of quitting is getting a job you like that pays a better salary, and that may take time; therefore, you need to have saved a financial backup to support yourself for a while.
If you haven’t already secured a job before quitting, which is the smartest thing to do, begin some research in the job areas you are interested in and find out how available those jobs are. Refine your resume, and begin to make some contacts with those industries that you are interested in.
- Failing to learn how to Invest and setting up a system for investing.
Investing is a necessary step in growing your wealth, but it can also be a way to lose your wealth if you don’t know what you are doing. Investing requires research and knowledge. Warren Buffet started his investment career like anyone else; he had to learn how. He did and has become one of the best know investors in the world and one of the wealthiest. Many books have been written on investing and are available to you via the Internet. Do some research and find out those which are counted as the best. The key principle in investing is developing a system for investing and do it consistently. It can start with designating a portion of your salary for investing and follow through consistently. A good start would be 10% of what you earn. If that is too much, start where you can and build up to it.
- Failing to build up an Emergency Fund
Just like your system of investing, you need to designate a portion of your salary for your emergency fund. This can be whatever amount you can afford; Over time it will grow into an adequate financial safety net that can save you from having to dip into your retirement investments or increase your debt.
8. Failing to Learn from Your Mistakes
One of the greatest mistakes is doing the same thing over and over again expecting a different outcome. We all make mistakes, but not all of us learn from them. Failing to learn from mistakes only sets you up to repeat them and hinders you from moving ahead in your goals. Thomas Edison failed a thousand times to invent the light bulb before he succeeded, but he did not call it failure; it was to him learning what did not work.
Take time to learn from your mistakes and discover what went wrong and what to do to keep it from happening again. Do some research and find out what others have done in similar situations. When we learn from mistakes it set us up to avoid them in the future and puts us on the right path to succeed.
Conclusion
Failing to plan and make wise decisions concerning finances and growing wealth can be costly. On the other hand, when you take time to think about your future and how you intend to reach your financial goals, you can reach a height of freedom when you are older that can enable you to live the kind of life you dream of rather than having to continue to work and having trouble making ends meet.