Everyone would like to know how to become rich, yet many people make financial mistakes every day that keep them from becoming wealthy — or at least from building up a nice nest egg. What are the dumb things that get between you and wealth? These warnings from experts will help you correct your financial mistakes and watch your bank account grow
Not Having a Planned Budget
Budgeting is a no-brainer. But failing to create a budget is one of the most common financial mistakes people make. It sounds simple, but people play fast and loose with their money, then wonder why they never discover the secret of how to become rich.
“Without a budget, it’s impossible to have control over your money and know where you are spending the majority of it,” said finance expert Kelan Kline of The Savvy Couple. “Without a budget, your money has no plan and will prevent you from building your finances up indefinitely.”
Being Reactive Instead of Proactive
When you handle money reactively rather than proactively, you’re likely to make mistakes. If you want to know how to become rich, handle your money with a sense of purpose and make it work for you rather than spending indiscriminately.
“One thing that keeps people from becoming wealthy is living reactively rather than intentionally,” according to financial behavior coach Derek Hagen of Money Health Solutions. “Going through life without knowing what money’s purpose is for you will make it more likely that you will spend money in areas that aren’t important to you.”
Staying In a Dead-End Job
The saying “a body at rest tends to stay at rest” applies to many things, including jobs. Most people avoid the time and trouble of a job search if they’re already in a decent position, but that’s a big financial mistake.
“While it can be difficult to look for a new job when money is tight, considering ways to improve your career should be an ever-present thought,” said Tom Blake, owner of This Online World, a personal finance blog for young adults.
“If you are working at a company that limits opportunity, you may be missing out on a chance to increase your salary and professional development over time,” he said. “If you feel as if the company you work for will never allow you to progress, it may be worthwhile to start a job search on the side and to look for an alternative option with more financial opportunity.”
Not Having an Emergency Fund
If you want to avoid dumb financial mistakes, follow the old adage “save your money for a rainy day.” You’ll never figure out how to become rich if you don’t build an emergency fund and learn how to use it wisely.
“When people don’t have at least a few thousand dollars on hand, they tend to make bad financial decisions when an emergency happens,” said neuroscientist Nicole Gravagna, author of “Venture Capital for Dummies.” “The emergency fund helps people make better decisions because of psychology, not because they pay their way out of problems. Having an emergency fund puts you in a mindset of having options.”[ Emergency Fund – Why You Need to have ]
“You may think, ‘I could use the emergency fund to pay this unexpected medical bill right now, or I can call the hospital and negotiate a payment plan so my emergency fund doesn’t get depleted all at once,’” she added. “It’s human nature for broke people to make worse decisions than people who have a little cash on hand, even when that cash on hand isn’t ultimately used to solve the problem.”
Overpaying for Necessities
“Paying too much for necessities could be keeping you from building wealth,” said Julie Ramhold, a writer for DealNews.
“For instance, things like car, renter, or home insurance are absolutely necessary. But if you aren’t shopping for the best rate, then you could be needlessly spending more than you have to,” she added.
To avoid this financial mistake, she advised: “Take the time to do some research and see what will work best for your needs and your budget. Doing so could mean the difference between saving nothing every month, and saving $100 or more a month.”
Living Above Your Means
If you spend all your money on a lavish lifestyle, you won’t discover how to become rich, even if you’re not racking up debt. Spending every penny you earn is one of the biggest financial mistakes, especially for younger adults, because you don’t get off to a sound financial start in life.
“After young folks finish their formal education and find jobs that they truly enjoy, they should strive to live a lifestyle that’s well below their means,” said Timothy G. Wiedman, a retired associate professor of Management & Human Resources at Doane University. “If they live well below their means, they can quickly retire their student loans while paying off any credit card bills they accumulated getting started in their new professions.”
Showering Adults With Holiday Gifts
Have you ever felt the stress of buying the perfect holiday gift for all your family and friends? Lavish gift-giving is not compatible with plans for becoming rich, especially if the recipients are adults. Instead of falling prey to this annual financial mistake, Ilene Davis, author of “Wealthy by Choice: Choosing Your Way to a Wealthier Future,” recommended changing the way you celebrate.
“Instead of buying gifts for adult children and friends when they have money to buy what they need themselves, why not just have a pot luck party where you get together to have fun?” she said. “The money you don’t spend on unneeded gifts can be invested to build wealth.”
Paying High Credit Card Interest Rates
Credit card interest rates aren’t written in stone, and you’re making a big financial mistake if you think they are. You’ll never get the hang of how to get rich if you pay double-digit interest each month.
“Consider transferring a high-interest balance to a credit card with a 0% introductory APR offer to give yourself a period of time to pay off your debt interest-free,” said credit industry analyst Nathan Grant of Credit Card Insider. “Some cards offer an interest-free period of up to a year or more.”
Source :- MSN