Saturday, October 6, 2007

Top 10 Biggest Financial Mistakes of All Time

Top 10 Biggest Financial Mistakes of All Time
1. Negative Spending
Have you created a budget and do you stick to it? If not,
you may be spending more money than you make. People who
have created a budget have a good idea of their monthly
income and expenses and can accurately diagnose their
financial condition. Other signs of negative spending
include the inability to pay off credit cards each month
and spending money on fun things before you have paid for
necessities.

2. No Rainy Day Fund
Do you have little or no money in savings accounts,
retirement plans, and investment portfolios? When
something breaks, or difficult circumstances such as
unexpected medical expenses or a job loss happens you must
draw down what little savings you have and go deeper into
debt.

3. Too Much Debt
Do you have so much debt that you are having difficulty
meeting your expenses each month? Are you 'borrowing from
Peter to pay Paul'? You may have re-financed your home or
consolidated debt to get cash to pay for other debts (maybe
more than once). Re-financing or consolidation can be a
very good tool to help you, but the ultimate goal must be
to reduce debt.

4. No Plan
Do you have a written financial plan, to help you plan for
unexpected things and future goals? A comprehensive
financial plan used to be difficult to come by unless you
had substantial assets, but with a financial plan you can
take control of planning your future.

5. Optical Rectitus
The condition in which your optical (eye) nerve gets
crossed with your rectal (anal) nerve and you see the world
through a crappy disposition. You can choose to be
negative or positive. Whichever one you choose will set
the course for your life. You can either make the best of
what you have, or be a victim of circumstances and spend
your life blaming others for your situation. Having a
positive attitude creates the state of mind for success and
overall health.

6. Self-Centeredness
You live mainly for yourself without thinking of the world
around you. You buy things that please you alone, and then
you don't share. For instance, what good is it to buy a
new gas grill then never have a cookout? You are enjoying
your holiday meal without even a thought about donating to
a soup kitchen or food pantry. Your children are enjoying
opening their holiday gifts, but you didn't think about
donating a gift for a needy child. You don't give money
and time away. You spend your time and money on yourself,
or on those in your very small circle. You will find
liberation if you think of others and 'higher things'
before thinking about yourself. Giving money away can be
the best "investment" in how you feel about yourself and
the world around you

7. You and Your Spouse Don't See Eye-to-Eye on Money
Perhaps one of you is a procrastinator and spender and the
other is a saver and has a 'get-er-done' attitude about
finances. This problem can be overcome, but it requires a
lot of work from both of you. Financial counseling may be
in order in extreme situations. Sometimes separate
checking accounts, but joint savings and investments can
help. Creating and sticking to a budget is essential so
that the 'spender' isn't always blamed for financial
difficulties. Also, remember that a lot of marriages break
up over fighting about financial matters. The small amount
of time planning and working through financial
responsibilities is well worth marital harmony.

8. Either Trust Too Much or Don't Use Advisors at all
You assume that anyone can make financial decisions and
that everything will work out in the end. You don't keep
up with the news so you were unaware of things such as
predatory lending practices on your 'interest only'
mortgage or the 400% interest you paid to the 'Get Cash
Now' store. You are certain that the odds are truly in
your favor to win this time so you are buried in magazines
that you bought to increase your chances to win. Your
basement is filled with products that you will sell
someday; you just had to get the minimum amount so that you
could be an official distributor and save more money.
Remember, if it seems too good to be true it probably is.

Have you put off seeking help from financial, insurance,
legal and tax advisors. Many people procrastinate to the
detriment of their financial condition. We all have to pay
taxes and we all need insurance and a will. Perhaps you
don't want to make the hard decisions that they may tell
you to make (like saving more money and buying insurance,
or delaying the purchase of things you want now). Tax and
legal advisors may save you money and legal entanglements.

9. Living Large
Do you spend money on homes, cars, vacations, or hobbies at
or a level above your income bracket versus a notch or two
below? Bigger homes, and cars, more sophisticated
appliances or whatever you buy, will cost more to purchase,
fuel, maintain and insure. The nicer vacation spot will
cost you more for your lodging, meals, and for everything
else while you are there. Have you ever allowed warm fuzzy
feelings to dictate the purchase of a pet without properly
budgeting for all of the expenses it would entail? Don't
buy anything if you can't afford all of the expenses that
will come with it.

10. Laziness
For some, the desire to pay bills, budget, and plan
finances falls somewhere below getting a root canal without
anesthesia. Sometimes procrastination or a desire to avoid
difficult topics (like thinking about your death for Life
Insurance or creating a Will) can keep you from achieving
your dreams.

Being successful with the money you have is not easy or
quick and there are no short cuts. Continue to educate
yourself about financial matters and obtain and follow a
financial plan. If you work hard to achieve the goals laid
out in your plan and avoid these mistakes you will be well
on your way to funding your dreams.


----------------------------------------------------
Kent E. Irwin, ChFC, CLU, CAP, co-founder and CEO of
eFinplan.com. eFinPLAN is the first and only web-based
comprehensive consumer financial planning software designed
for people who are trying to do a lot of their own
financial planning. Find out more about how do-your-self
financial planning and how to reach your goals at: =>
http://www.efinplan.com/

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