Some of my best personal finance advice – so you don’t have to make the same mistakes I did!
Human behaviour is a funny thing. Some folks like to talk a big game about lessons learned but fail to act accordingly.
Why is that?
What makes our behaviours so painfully difficult to change?
We’ve all heard “where there’s a will….there’s a way” but that’s just part of the behaviour-change equation in my opinion.
In my workplace role, change is all around me; it’s what I do and what I help manage but I certainly can’t do things alone. I require teams, a good culture/environment, skills (some that I certainly don’t have) and much more to be successful.
In their change model, they identify five key ingredients for change that must be present, arguably in different quantities depending upon your context or situation to have a hope:
ADKAR® stands for:
- Awareness – including change drivers such as the need for change, “the whys” and includes “what’s in it for me.”
- Desire – ultimately the personal choice about motivation.
- Knowledge – knowing how to change.
- Ability – the skills to actually get the know-how done.
- Reinforcement – forms of recognition, rewards, and celebrations.
*ADKAR® is a registered trademark of Prosci (used with permission), a global leader in change management.
Over the years, thanks in help to running this blog, I’d like to think I’ve changed my personal finances for the better. I have some awareness, desire, knowledge, ability and I see the rewards that come with saving, investing, paying down debt and simplifying my life. My lessons learned have been harsh at times but in most cases, they have made me a better CFO at home.
For today’s post I thought I would recap some common money fails and why you should avoid them.
Carrying a balance on credit cards or on a line of credit
We don’t carry a balance on our credit cards and never intend to. Credit card debt is one of the highest forms of debt. If you can avoid credit card debt by paying off any balance every month, I suspect your future self will thank you.
If you can avoid using your HELOC (Home Equity Line of Credit) like an automated teller, and you pay that debt down religiously each month I know you’ll have more money in your pocket over time.
Having no emergency fund
We have a small emergency fund at the time of this post and we’re working harder to increase it.
We figure about $10,000 or so in cash is a good amount for us. (I arrived at that number based on this older data here – average household expenditures so maybe it could be lower for you.)
Unfortunately, whether you like it or not, financial $hit will hit the fan at some point. I know we’re thankful to have our emergency fund in place but it wasn’t always that way.
Buying too much house
Guilty as charged!
Look, we loved our larger home but we decided to downsize and move back into the city.. My advice is to avoid taking on too much debt (to afford any home) you can’t reasonably pay off in 10-15 years.
Whether you want to acknowledge this or not – buying coffees is not hurting any retirement plan at all. I encourage you to enjoy your specialty coffees all you want just remember it’s these two expenses that are killing your retirement dreams.
Not (always) saving for retirement
If you think the government or your workplace pension might be enough for retirement, think again Gen X. The story is even worse for Gen Y. This is the new (minimum) savings rate for a decent retirement and it’s not 10% folks.
I came to my senses in my early 30s. I knew if I didn’t take charge of my early retirement future no one would.
To help me save for retirement, I started making our savings for retirement purposes automatic – like a bill payment to Me Inc. I think saving anything less than 10% net income today will leave you with less options down the line: working longer or spending less. Either one isn’t ideal for me.
Some of my best personal finance advice summary
I’ve got more money regrets but you get the idea. Avoiding these money mistakes should make you wealthier, less stressed and far more financially resilient. My blog is here to help!
What are your lessons learned for a better financial future?