Some of these points are intuitive, but worth emphasizing; others are less obvious and pretty philosophical.
Read the list and make sure you aren’t making these mistakes.
1. Taking out an excessive loan to buy a car
This may come as a shock, but a car is a horrible investment.
A car purchase is generally not tax deductible. And cars depreciate right when you drive them off the lot. Buying cars you can’t afford in order to keep up with the Joneses (or Kardashians) will surely keep you in the poor house, so don’t buy more than you can afford.
In fact, you really shouldn’t finance more than 15% of your annual household income for a car. This should come as no real problem. The U.S. is full of used cars you can purchase affordably. Take advantage of it.
2. Investing in stocks versus paying down debt
I run my financial affairs similarly to Apple or Google, just on a microscopic scale.
This means I have as little debt as possible. As a result, if I have some extra cash, you better believe that I’m going to pay liabilities rather than invest in the market.
I understand that investment advisors might explain that if you would have invested a year ago, you would have made a return on your cash by now.
But here’s the thing: Hindsight is 20-20. The return they speak of is completely contingent upon how well you would have invested it.
The stock market is a gamble. Can you afford to gamble?
3. Believing the hype
“Save three dollars a day and retire ten years early!”
“How much is that latte really costing you in the long run?”
“It’s the little things that kill your budget.”
Points similar to these are constantly being touted as the secret ways to get your financial house in order. What you need to understand is that it’s not the little things that you do that determine your financial health.
Big decisions determine your future wealth – like the decision to buy a new car every ten years versus every five years. Or, whether or not you take that $10,000 vacation to Greece.
Little things like drinking a $3 cup of coffee every morning – or eating out with your coworkers at lunch a couple times a week – won’t break you or make you rich. So don’t let the crazies on the Internet take your latte away.
4. Being artificially ambitious
I’m just going to come out and say it — I think there’s more to life than making money. There is. Happiness matters. And you need to be a well-rounded person to be happy. If you don’t believe me, look at the stories of all the rich, miserable people in the world.
Similarly, I also believe there’s more to making money than putting your head down and working really hard. For example, common sense, planning, health, and a proper attitude are also necessary for financial stability and prosperity.
So despite what you have been told, you don’t have to set the world on fire.
In fact, having an overzealous ambition to make millions, or even billions of dollars, could lead to entrance into risky business deals, debt, and general unhappiness. All of which will have a negative impact on your personal bottom line over the course of your life.
This doesn’t mean that you shouldn’t pursue your idea of the decade, if you have it. It just means that if you don’t aspire to be the next titan of industry, you’re not a loser.
You’re probably just content with where you are in life. And that’s okay.
Final thought
Want your taxes prepared by someone who is with you on your quest to make good financial decisions? Let Dino Tax Co help you with your taxes this year.
Recent Comments