When asked what their biggest money mistake was, many people will respond that their biggest financial mistake is something they bought. Whether it is a house, a car or their education, the answer typically given is an active financial act that has been taken. But the question is not what is the biggest purchase that you have made that you now regret. The question is, what is your biggest money mistake. The biggest financial mistake that you likely have made and may continue to make is not what you have purchased, it is what you have not yet done.
Lost Opportunity
Your biggest financial mistake is likely not a purchase that you have made. Surprisingly, your greatest financial mistake is typically a decision that you did not make. It is, lost opportunity.
If the opportunity was taken and worked out in your favor, it is not a mistake and as such the decision would not fall into the category of a financial mistake. On the other hand, if a lost opportunity is a mistake, the size of the mistake only grows. The reason for this is the opportunity cost and the compounding of that mistake. For example, think about not taking a job or not continuing your education.
If these decisions worked in your favor, it would have been a boon. However, if these decisions were in fact a mistake, when looking back, you will see the opportunity lost in your career earnings, relationships, status and financial security. These losses will only compound over time. The mistake will only grow.
But do understand that this works in the other direction as well. By doing your research, due diligence and making a good decision, the benefits here only compound. Make a great financial decision today and enjoy the compounding benefits over your life time.
The Financial Mistake Of Not Saving Earlier
Financially, your biggest mistake is likely that you did not begin saving earlier. With regard to saving, consider the opportunities that you have missed out on because of lack of funds. Think of the turmoil that you may have experienced during one of the many financial downturns over the last number of decades. How different would that have been if you had been saving earlier?
Saving is the basis of any financial plan. Without effectively saving, you will not build an emergency fund to ride out the financial bumps in life. Sadly, the importance of saving usually dawns on us during a financially rocky situation. For example, it is only when you lose a high paying job that you think of how much you have wasted on nonsense. Think of professional athletes, lawyers and doctors. The financial regrets only comes after going through a financial rut.
Did you lose a house or other financial possessions? Think of what you could have done with an emergency fund. If you have not yet began saving, do not allow this financial mistake to compound. Begin saving today.
The Financial Mistake Of Not Investing Earlier
Consider if you had only knew then what you know today. What would you have done differently? If there were no time machine, as there current is not, how can you implement your learnings today and benefit going forward.
On average, over the last 30 years, the stock market has given a return of between 7-10%. Imagine if you had place a portion of your money 20 years ago into the stock market and continually did so. You would have most likely been a millionaire at this time.
The fact is, with compounding, it really does not take that much. It only a little money but a lot of time. Use the many financial calculators that they currently have. You will notice that with an average of investing let us say for simplicity about $100 per month for 20 years, the amount that you gain overtime is remarkable to put it lightly.
Your biggest financial mistake is not investing earlier.
The Financial Mistake Of Not Investing In Your Financial Education Earlier
Knowing that you should save, invest, and reduce debt is the basis of long term financial success. This is in fact the basis of financial education. You must save to have money to invest. Without saving and investing, your money does not grow. Further, no matter how much you may save or invest, you will not get financially far if your funds are going to interest payments on debt.
Somewhere along the way we all have a financial wake up call. It could be by learning through others or learning a tough financial lesson ourselves. But, at some point or another, we will realize that we should save more, invest more, and have less debt. I did not say that we will all act upon this realization. Some of us do while others do not.
This is like anything else in life. While we know what is best for us, we may never act. For example, at a certain time in our lives we will realize that we are getting older and need to start thinking about retirement. In this case, many of us continue living it up while others make a change. As another example, at a certain time in our lives, we realize that we should get healthy. Some of us make changes while others continue to have an unhealthy lifestyle.
Financially, it is the same. We know that the more we invest in our financial education, the more likely we are to succeed financially. Yet, most of us rate having a chat about money as near the bottom of the events that we want to do. Most of us refuse to learn about debt and compounding. Most of us engage in keeping up with the Jones instead of focusing on our financial reality. Yes, a lot of us are stuck in the “fake it till you make it” phase of life. This does not work in the long run.
Take hold of your financial situation and invest in your financial education today. The more you learn today, the greater your potential for tomorrow. Your future self will thank you.
Conclusion
When asked what their biggest money mistake is, many people will respond that their biggest financial mistake is something they bought. Whether it is a house, a car or their education, the answer typically given is an active financial act that has been taken. But the question is not what is the biggest purchase that you have made that you now regret. The question is, what is your biggest money mistake. The biggest financial mistake that you likely have made and may continue to make is not what you have purchased, it is what you have not yet done. Stop making financial mistakes and journey to financial independence.
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