Mistakes are a part of life. Mistakes are momentary failures that provide invaluable learning opportunities that help lead to success.
Even the most successful people on earth make mistakes. I’m willing to bet that the mistakes they made throughout their career more than likely helped shape their successful future.
When it comes to your career and success, here are 3 common money mistakes and how you can avoid them.
1. Lifestyle Creep
As financial resources increase, expenses rise like bread baking in the oven.
It begins gradually: you start spending more going out to eat, traveling, enjoying a few of the finer things in life that you couldn’t afford before. You consider buying a bigger house, new cars, moving your kids into private schools, taking up expensive hobbies. Keeping up with the proverbial Jones’ can have a detrimental impact on your spending as well.
One way to avoid these common pitfalls is to draw a circle around your lifestyle. By that I mean, put a stake in the ground, carefully noting the size and scope of your lifestyle spending, and resist at all cost letting it creep higher. This will likely require some support and accountability from a financial advisor, unless you possess strong will power.
I have witnessed many people who let their spending rise faster than their income, and ultimately have to make draconian changes when they start to run out of money or an unexpected problem appears.
Becoming accustomed to a more lavish lifestyle greatly compounds the amount of money needed to support your life over the long term and may extend the number of years you will need to work for income.
2. Timing the Market
Financial markets are risky and volatile, and they create emotional behaviors driven by fear and greed.
One of the biggest mistakes I see people make is believing they are smarter than the stock market and thinking they know when to get in and get out. Staying unemotional is the appropriate stance when investing, but it’s fairly common to be victimized by your emotions and let them overtake logic because the stakes high when it comes to our money.
Black Monday in 1987, the tech bubble bursting in 2000, and the financial crisis of 2008 all had the same outcome: within a few years of the market plunge, investors who had ignored the news and stuck with their investments were better off than those who thought they could sell at the top and buy back in later. That doesn’t work as a strategy because you have to get two very difficult decisions right. Even if you sell at the right time, buying back in when all of your emotions tell you to stay away is one of the hardest things to do, even for experienced investors like me.
Instead, focus on the things you can control: investment expenses and taxes, having the appropriate allocation of investments for your risk tolerance and objectives, and generating additional funds that can be added to your portfolio and compounded over time.
3. DIY Too Long
There comes a point where you have to honestly evaluate whether you have the time, talent, and inclination to manage your own financial life.
You may tell yourself, “Hey I’m smart – I should be able to figure this out.” There are lots of tools and services on the Internet that cater to your desire to manage your own money, and for some people it can be a perfect fit.
More often than not, as the amount of money in accounts rises to “meaningful” levels, I hear statements like: “I haven’t looked at my accounts in months,” “I need to be more responsible about learning about my money,” “I don’t really enjoy the process of managing money and I’d rather spend my free time in other areas that interest me,” and “there are real consequences if I screw this up.” It can be expensive to seek help from advisors and professionals, but your time is probably better spent creating wealth than managing it.
Having the support of the right advisor will validate the cost by improving your peace of mind, generating better results, and freeing you to spend time doing the things you love.
As I said earlier, mistakes are a part of life and they affect everyone, especially on the road to success. It’s up to you to learn from and apply them.
Originally published on Quora.