Financial Sabotage
“Whoever is careless with the truth in small matters cannot be trusted with important matters.”
-Albert Einstein
These are the most common ways people commit financial sabotage on themselves and make their lives miserable. Avoid these common financial mistakes:
1. Inadequate financial record keeping.
Keep accurate records of your expenses to avoid overdrawing your checking account. Overdrawing your checking costs you anywhere from $15-$30 in over draft fees each time you overdraw your account.
2. Using credit cards to pay recurring bills.
You ran out of cash and you grabbed your card to pay the electricity bill. If you can pay off the credit card bill in full every month, no late fees, no interest, then no problem. But if you consistently pay bills with your credit cards, raid your cash and add increase your credit card balances, you are digging yourself further into the hole.
3. Waiting to pay bills until they are overdue.
This costs you late fees and a damaged credit report. Damaging your credit report costs you increased interest fees on mortgages, credit cards and other debt.
4. Living pay check to pay check
Financial red line is not a healthy place to be.
When you’re living on the edge, you are much more likely to accumulate credit card debt, miss bill payments and save nothing. Work on living below your means, whether this necessitates you getting another job or looking for other ways to make money, look for ways to live below your means so you can save something and cut yourself some financial slack.
If things are so tight that you are spending every last quarter each month, you are committing financial sabotage each pay check.
5. Not communicating with spouse/family about money.
If you’re the family member in charge of the finances, think about your communication with the other people in your family about money. Is it positive? Do you go away feeling frustrated?
Is the problem that you’re with someone selfish or you are hiding something about your money? Examine your patterns of communication and see if there are things that can make your finances run smoother with your family or your partner.
Financial sabotage often runs in families. If you talk about money in your house and teach your kids good money management habits, it will pay off big time when they go out into the real world.
6. Taking on a lot of consumer debt.
Your lifestyle can easily overtake your finances if you let it. Keep a spending journal for a few months to see what you spend on and where you are able to make cuts. If you use your credit cards for everything and pay minimum payments, you are digging a hole you might never climb out of.
Spend consciously on necessities and things you really enjoy and skip the rest.
7. Trying to buy love.
Find people to hang out with and love who don’t care how much you make or spend on them. There are a lot of things you can provide someone in a relationship that have nothing to do with money.
Emotional support, attention and care go a lot further than your wallet. Make yourself amazing to be around and you’ll find that you end up with much more satisfying relationships that aren’t based on money.
Have you financially sabotaged yourself by giving people loans that they haven’t paid back? Have you dated people who dropped you once you stopped picking up the check? Do you buy people presents if they are upset with you? Keep your emotions in check when you get in relationships. No relationship should come at the cost of your financial stability.
8. Being financially disorganized.
Not knowing when things are due or only paying bills in relationship to their due dates without a plan can cost you money and your sanity. Get an idea of when all of your bills are due and then organize your bill pay. Check out how to make a budget for ways to get your bills organized.
9. Not getting and maintaining proper insurance.
All you need is one emergency like a hurricane or fire to be totally financially wiped out. Get, keep and maintain car and renters or homeowner’s insurance. Just consider it an important cost of living and pay it on time.
One of my friends lost everything in one of the California wildfires a few years ago. She ended up with nothing because she thought she didn’t need renter’s insurance. This could have been prevented if she had just spent a just little bit of money every month on renter’s insurance.
Catastrophes are traumatic enough with insurance, and totally crushing without.
10. Not saving at least 10 percent of your income or only saving haphazardly.
Like a dieter who keeps promising they’ll start losing weight on Monday, people who plan on saving tomorrow sabotage themselves financially. Wouldn’t you feel better knowing that in a financial crisis you would have something to fall back on? Learning disciplined saving and financial control is the first step on the path to becoming rich. Make your finances automatic and put the first 10% in savings.
11. Compulsive spending and/or gambling.
These are addictions. Take them as seriously as you would a drug addiction. Raiding your brokerage account to bet on the hot stock is also gambling. As evidenced by 2008 in the financial markets, asset classes do not always go up. Just because you can buy AIG stock cheap doesn’t mean you should.
If you want to bet on Bear Stern’s big re-opening, instead you should just send me the money, and I’ll buy shoes. At least that way, someone will get something out of it.
12. Lying about your spending habits to yourself or your spouse.
Divorce is much more expensive than nipping money problems in the bud early in your relationship. Most people divorce over money.
If you aren’t honest with your spouse about what you’re doing financially, you are creating a cycle of recrimination and shame that isn’t easily fixed with a larger paycheck. Be honest. If they browbeat you or make you feel bad because you made mistakes, try to focus on improving your communication over money. If this doesn’t work, start thinking about your exit strategy.
Even better, don’t pick the wrong spouse in the first place.
Tags: Financial Sabotage