“Most people don’t know whether they are investing, speculating or gambling, and to the untrained eye the activities are very similar.”
Jim Paul and Bendan Moynihan authors of What I Learned Losing a Million Dollars
No matter where you are today in regards to your finances, or what you’ve done up until this point, you can always improve.
For my wife and I, after decades of successfully running a small business, we still weren’t where we wanted to be to retire comfortably. For us, the most important thing was to gain financial freedom.
Sure, it’s easy to say, “Woe is me. I’ll never have enough to retire. I’m going to work myself into the grave.” It’s even easier to follow along with the same old, traditional finance products and services being sold to you that are perceived as the “right” way to invest.
But neither of those paths will lead to the financial independence you truly want.
You have to take action; and that starts with getting specific about what you want and targeting your focus on the end result. Along your journey, you’ll encounter trials and tribulations that can cost you thousands if you don’t know what to look for.
Avoid these common money mistakes in your journey towards financial freedom and position yourself to protect and grow your money:
1. Believing Your Home Is Your Greatest Investment
A common misconception has been that a home is the best investment we could make. WOW! What a farce that’s turned out to be…
Listen, it’s not always a hard and fast rule, but your house is rarely a good investment. Consider the initial cost, cost of interest on the loan, regular repairs and maintenance and before you know it, you’ve paid for you house three times over.
Yet, for most Americans who don’t save, their home is their sole form of equity by the time they hit 65. They think it’s an investment, but I should not be the only one!
Everyone needs a home, but buying a home you can not feasibly afford just because you think it’s going to be a “great investment down the line” will put you in a situation with which you won’t be able to keep up.
Here’s what you should do instead: your down payment should be at least 20% of the initial cost. The banks will loan you more, but it’s rarely in your interest to go to the maximum amount they would.
In addition, you want your monthly mortgage payments to be 20% or less of your monthly after-tax income.
Lastly, be careful with your amortozation period and how it fits with your investment philosophy.
2. Failing to Establish a Consistent Savings Plan
When you exit the work world, you want to be able to keep up the same lifestyle as during your working years, right? You haven’t worked your whole life just to go backwards.
You know your spending habits, and guess what? They aren’t going to change when you retire! Get into the habits of saving NOW.
The average American saves only around 5%-10% of their income; that number should look more like 20% or more. Your ability to save now is imperative.
3. Waiting to Jump into the Investment Game.
For many small business owners, even ones who’ve been in the game for decades, they don’t start investing until their 50s or later. At that point, you’re just playing catch up.
I get it! I really do. You’re so focused on growing your business, you forget that you might want to sell your business one day. But when that day comes, you might not be able to.
Financial freedom means consistent savings every pay cycle, diversifying your investments and really knowing what you’re getting yourself into, rather than just mindlessly trusting some advisor or this and that person who said it was a “sure thing.”
Save, invest and don’t spend it all.
You’ve heard our story, now you tell us yours.
What does financial freedom mean to you?
When you’re ready to start your journey — we’re here.
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