The truth is, a lot of people are quite responsible with their money and personal finances, but many still make these mistakes. The three mistakes I discuss in this post are big but easily correctable, and upon correction will allow you to live a life full of financial freedom.
Mistake Number #1 – Not investing soon enough.
In my new book, The Latte Factor: Why You Don’t Have To Be Rich To Live Rich, I have a chart that changed my life in my early 20s and it can change yours too. The chart shows the power of starting early.
You want to start saving early.
- At age 25, save $300 a month @10% at age 65 = $1,913,334
- At age 35, save $300 a month @10% at age 65 = $684,097
- At age 45, save $300 a month @10% at age 65 = $230,009
- At age 55, save $300 a month @10% at age 65 = $62,265
Here’s what happens in the real world.
- At 25 people don’t think about investing.
- At 35 people hear about investing.
- At 45 people worry about investing.
- At 55 people hyper ventilate about investing.
Don’t wait one more day to get to started.
Mistake #2 – Not getting your money to work for you.
You can’t build wealth if your money doesn’t work for you. Put your money in the bank and earn 1% and it will take you 72 years to double your money. Earn 5% and it will take you a little over 14 years to double your money. Not bad. Earn 10% and you will double your money in 7 years and two months. Yesterday, I read about a mutual fund in Baron’s that has averaged 14% for the past ten years. In a fund like that you would have doubled your money in 5 years.
The reality is that people who build wealth have their money working for them 24/7. It’s just math. You can’t get rich standing still. Your money has to work for you. The rich get their money to work for them all the time. That’s how they got rich.
Mistake #3 – Taking too much risk with your money.
Everyone wants to get rich quick. Which is why most people stay broke forever and slowly go nowhere financially. Every year, every decade has its new “thing”. The last few years its been bitcoin and cryptocurrency. I was saying in 2017 that 90% of these “coins” would be worthless. Since that time about 700 billion in value has been completely wiped out. The saddest thing about how much money has been lost is that a lot of that money has been lost by people who can’t afford to lose it. You should not be gambling with your hard earned dollars ever. There is no such thing as “play money”. Unless you played to earn your money it’s called “work money”. Don’t gamble with your work money!
Originally published on Quora.