Financial planners usually encourage clients to prepare for the worst case scenario, even if it’s unlikely to happen. Failure to control your spending, gambling or asset-picking, and serious accidents may have a serious impact on your ability to meet financial needs or save. Knowing how to prepare for unplanned events can make ease some of life’s nagging concerns about “what if?” Here are four financial mistakes to avoid:
Bad Spending Habits
Many people believe they already live frugally even if they don’t. Using a spending journal to keep track of your purchases is one way to see whether your spending aligns with your values. According to Charles Duhigg (“The Power of Habit: Why We Do What We Do in Life and Business,” 2012) it is possible to change almost any habit in about three months. Keeping a journal is one of the best ways to identify frivolous expenses. Curbing excessive spending and rethinking priorities is essential to achieving savings goals.
Nitpicking Your Investments
On the flip side, over-attention to one’s portfolio can be very detrimental to your long-term investment goals. After building a financial portfolio with high quality assets, commit to a long-term perspective. Although regular score-keeping is essential, daily or weekly market gyrations should not prompt you to make a rash decision or completely change directions. Asset diversification and time are required to achieve significant lifelong wealth.
To become wealthy, you must commit to making wise spending choices every day. Whether you earn $20 million per year like Derek Jeter or $50,000, unwise spending will erode your chance to build real wealth. Spending money every day may feel good but it can severely limit your ability to save if left unchecked. Instead of buying whatever you want, take a few days to consider whether a purchase is necessary and truly important.
Serious Car Accident Or Personal Injury
Accidents can and do happen. Failure to prepare for the unexpected can have negative financial repercussions on an individual or family. For example, financial planners recommend keeping three to six months’ expenses in an emergency fund to prepare for the unexpected. Medical, health, long-term care, and life insurance should form the foundation of your financial portfolio. If you don’t know any lawyers who specialize in personal injury, it wouldn’t hurt to form a few new relationships. It helps to know an accident attorney if that happens to you, rather than having to find one after the fact.