Top Ten Mistakes you make in Money Management

When we start earning money – most of us try to fulfil our bucket list of wishes, we go beyond our earnings and spend a lot.
I am also one of you who maximized my spending but never thought of savings, investments and creating wealth the money I earned. This made me wonder and I started to research on money management, investment and wealth creation. I will give handpicked Top ten reasons why we fail to enhance our wealth without compromising our desires and needs. YES, you read it right. We can enhance our wealth and accumulate assets without ever compromising or forgetting about our desires, holiday trips and needs in general.

You are at the right place at the right time reading about reasons for failed money management. WE GOT YOUR BACK. An important ground rule here is you need to be disciplined with money to create wealth. So without waste of time let’s get started with the Top ten mistakes you make in money management:

1. Trying to cut expenses instead of growing income:

Chanakya in Artashastra quotes that “One should take of his needs and needs of his family and any shortcoming in needs can bring great miseries” (This is near translation of quote and not actual words). Always avoid cutting down your monthly expenses on necessary things. But keep an eye on things that you desire. Be disciplined and control your desires and decently plan them so that you don’t go bankrupt. If your expenses are increasing then it’s time to increase your income. This can be done in many ways. Try and adopt ways that suit you.

2. Not valuing your time:

“Time is a tool with which can create money” – Unknown

This quote makes a lot of sense when you understand the value of time. You can do a lot of things with the time you save by avoiding things that do not add value to your day. It may seem okay to binge Netflix or scroll social media for hours and hours. But think about the productive work or learning you could earn at the same time. It is not worth the travel hours of the journey just because you get something cheap. Try to plan your day as much as possible. Divide your day and keep some dedicated time for your recreation. Make sure you have something productive at the end of your day. Keep track of your daily activities and start some mini projects, side business, start learning something new. So that you keep yourself productive, busy and invested. This will directly or indirectly translate into wealth and money.

3. Not taking risks

We have been constantly and repeatedly programmed in various ways to “play it safe”. Consciously we do not want to experiment with new things. We avoid risks as much as possible by doing things that others/elders tell us in the form of advice and guidance. Well, it’s important to hear their opinions and understand their learnings from the past. But it’s equally important to try new things. Especially with investments and businesses, try to invest a small amount in stocks. Learn to sell some product or service to your friends and strangers. Reach out to a random person on a random street and pitch an idea and convince him/her to pay for your product or service. Now you would be like “Who will do something like that?” but the catch is; this is part of learning and networking. If you understand people and you upgrade your skill to sell. This will be your most valuable asset. If you make mistakes in the process you can learn and come back much stronger.

4. Starting late or being reluctant

When we start earning money we usually think that it’s time to enjoy, party and fulfil our bucket list. I understand your emotion. But do not ignore the fact that money is like water, once it’s gone it’s gone forever. Start saving a part of your earnings. Another important reason that we tend to be reluctant about savings and investments might be due to various reasons but it is important to start now than regret later.

5. Not owning assets

Your car is not an asset. Your expensive phone/watch is your asset. Owning a stock of the company is an asset. Having a side business is an asset. You don’t need to have knowledge of stocks or own a business to own assets. Investing in FII’s, government and private sector bonds, investing in the business of your friend will also act as an asset. Invest in mutual funds which act as an indirect way to invest in stock.

6. Timing your investments and FOMO

This is the biggest one of all. You don’t have to wait to invest your money.  Start small, start early and be consistent is the simplest principle we can follow. One more factor is “Fear of missing out” – This is a scenario where you are trying to invest in something when you fear that you’ll miss out on the chance if you do not. This will not be the case most of the time. Do not panic when you are making investments.

7. Taking excessive loans

This will be a big hurdle you will put on yourself. Taking loans for something which does not earn money either directly or indirectly will lead to misery in life. Loans are a good way to accumulate huge amounts of money. This is followed by an interest and a time frame to pay it back too. So plan your loans (if you are taking one) in a smart manner that does not bother you and makes you fall into trap of debt.

8. Comparing

This is a natural tendency that we start comparing ourselves with people around us. Comparison can be with your friend or a billionaire. Others do not have anything to do with your money. Your money is your problem and responsibility. Figuring out to manage your money and eventually build a stash of savings is an individual responsibility.

9. Excessive spending

So far we have seen many factors which tell how to save and invest. This is the factor which speaks about how not to spend. If I can buy a simple analogue watch with my current source of income buying an Apple smartwatch is way out of my league. I should not go and buy that apple smartwatch just because I own a credit card. There is a famous saying – Buy something you want only when you can afford to buy and maintain ten of it. This is very true in everyone’s life.

10. Chasing Money

This is another dimension of money management where we simply chase money and do not think about creating wealth. We try to do a lot of hard work and forget to give time to ourselves, our family and friends. One should become smart and allocate time and make efforts to make money and also balance precious relationships in our life. Money cannot buy you happiness but it is an important tool to create an environment around yourself where you live happily.

Note: This blog is researched and documented based on observations of experts in money management and the learnings of authors so far. Any suggestions and improvements are welcome.

Author: SujayKumar Kulkarni