No one would want to run out of breath living like a rat, yet many of us make financial mistakes that chain us to poverty. Not only do we make money mistakes, but our mistakes are rather predictable. Our dumb ways with money are what burn the bridges between us and wealth.
Smart financial strategies might be straightforward, but you can’t argue that they are not always easy. An egg nest to sustain yourself is necessary to sustain yourself in the future. Yet, building such a nest is challenging since no magic potion can give you the ability to be financially savvy and avoid all dumb financial choices ahead.
Sometimes, despite all the hard work we commit ourselves to, the same deceptive traps trick us every single day into making the same old mistakes. It’s not too late to change them, though.
Here are 7 ways people dumb with money and gamesmanship tips on how you could avoid them:
Reckless Spending
You are more likely to make more mistakes if you live life reactively. But what is a reactive lifestyle anyway?
A reactive lifestyle is described as being responsive. When a particular thing happens, you react to it. For instance, it’s your rest day, and your initial plan was to relax in your home and not waste a single penny because you want to save up money. Yet, when one of your colleagues called you out to party, you dash into your closet to change clothes for the social bash.
Living reactively means you are allowing life to lead you rather than taking charge of leading your life. This is just one of the ways that people are dumb with money. Unfortunately, this repeatedly happens to many, which leads to uncontrolled, reckless spending.
Rather than spending your money foolhardy, you need to have a sense of purpose with your money.
Loans, bonuses, and extra commissions? They are not extra money meant for your shopping escapades and parties. Treat every single dollar that comes in with respect and put them to good use.
Living an unsustainable lifestyle
Not living beyond means is a topic often discussed in almost all financial advice around the globe. You won’t ever discover the secret to becoming rich if you continue splurging your money on a luxurious lifestyle.
Many people take more pride in ‘looking’ rich rather than focusing on really being moneyed. They work hard earning bucks to buy designer bags and clothes to appear lush and extravagant. And sometimes even fall into big debts because of excessive purchases just to fit into the crowd.
Living beyond your means is probably one of the dumbest things you can do in your life, especially if you are a young adult who’s just making a debut in the adult world.
According to Management and Human Resources professor Timothy G. Wiedman, young adults who finished formal education and landed a job they enjoy should aspire to live a lifestyle that is well below their means. This is to be able to retire with their student loans and debts they got while getting started with their careers.
Opulence spending has been so rampant that Mastercard has been on the top of the stock market chain for the past 16 years. Luxury goods have been flooding the market, and while there hasn’t been a rise in salaries, there’s a great number of people who have the urge to keep pace with the A-list.
You will never escape the rat race if you continue to walk into the path of looking rich.
Investing conservatively in your 20s
Only a few inexperienced dared to venture into investing in the stock market because of the fear of losing their money. To tell you frankly, investing conservatively in your 20s is a dumb thing to do.
Fear of the unknown is just natural, especially if what you will be gambling is your precious hard-earned money. However, the stock market can bring you so much profit, making it worth the bet.
If you are afraid of the market crash, keep in mind who isn’t, right? Go for long-term investing, and you will not lose. If you would follow Warren Buffett’s value investing strategy, the stock market can be your playground, giving you enormous passive income.
It’s better to start early in your 20s. The previous generations didn’t have the privilege of having investing resources as you have right now because of the internet. Take advantage of the virtual world to learn the ins and outs of the market and how you can benefit from them.
Don’t let your age stop you from making this important decision in your life. Go wild with your investment portfolio before adulthood responsibilities chain you.
Forgetting to cancel subscriptions
Have you ever subscribed to a particular member for a free trial and found yourself paying the following month because you forgot to unsubscribe to the membership? If you have, you are not alone. Some applications just seem to be so interesting that it’s pretty enticing to try them out.
The problem here is forgetting to unsubscribe after finding out that they are not as good as advertised. Because of this negligence, auto payment subscriptions can automatically deduct some bucks in your account for an application that you don’t even use. A total waste of money!
To avoid squandering your finances on useless subscriptions, create a calendar that tracks every subscription. Navigate all your subscriptions to know the time to cancel or renew them. Being precise with your subscription expenses could save you money.
Signing a contract that you don’t comprehend
Whether it be a mortgage contract, loan agreement, or job contract, you need to understand the terms indicated in the contract fully. You might find yourself in deep trouble later on if you don’t.
Contracts are legally enforceable, so it is critical to read them thoroughly before signing since you cannot change them unless a situation deems them void. Keep in mind that no one will crucify you if you try to understand a contract carefully.
If contract terms are too unfamiliar and you don’t understand a thing about what the document says, you can have a lawyer assist you in examining the clauses. Ask questions regarding sections that are unclear for you.
Put your mind to signing a contract if you understand what it states 100% and thoroughly understand every written word in the paper.
Borrowing money for school
Student loans are wild in the United States, and almost everyone has the privilege to take out one. But hear me out! Borrowing money for school is a dumb thing to do…if your child isn’t fascinated by schooling in the first place.
If you are a parent with a kid who isn’t interested in studying at all, don’t take out loans and force them to go to school. You will have to pay the price when things get out of hand, and they drop out without your consent. Make sure that your little ones would continue to pursue their studies despite the hurdles before taking out a loan.
Investing in something you don’t understand
Investing in things you don’t understand is the dumbest thing you do in this lifetime. According to Berkshire’s CEO Warren Buffett, investment ideas have three boxes: in, out, and too hard.
If a company or a certain product is quite difficult for you to grasp, it’s better to just consider it as ‘too hard and move forward into another opportunity that you could understand.
