How to fix financial mistakes
Most content regarding personal finance can be summed up with one sentence: spend less than we make, invest the rest.
Over 200 million adults are in the United States, and most would say this exact sentence.
But when we look at the statistics, we notice that a large percentage of retirees rely on Social Security for the majority of their retirement income, that people who own homes have the majority of their net worth in their homes, and that the average retirement balance for any generation is underfunded.
This isn’t all doom and gloom. Relying on Social Security isn’t bad, owning a home is amazing, and Americans’ retirements have never been better.
But we have far more freedom if we invest better and avoid mistakes.
Here’s what I know after having done this for a long time.
Stuff happens – lousy stuff – cancer, lay off, care for a sick child, care for an ill parent.
Stuff that is 100% out of our control.
And then some things tip people over the edge that are in their control —buying too much house, putting on a new roof, a series of unforeseen expenses that happen back to back.
Stuff that doesn’t seem bad by itself but can compound on itself.
And then there are foolish mistakes—buying stupid stuff or investing like a 15-year-old would.
Here are a few examples of these things that set people back.
- A 35-year-old who hasn’t saved for retirement because of significant health bills from NICU stay for his son.
- A 55-year-old who gets laid off and takes one year to find a new job – spends a third of her brokerage account.
- A 19-year-old on track to graduate college with $150k in student loans.
- A 45-year-old, saving 4% of their income and low retirement savings, taking out a loan for a $25k recreational vehicle –
These people are in a hole, and it takes time to get out.
And as we know, time is money.
This “get in trouble, can’t get out” is why the statistics are how they are.
People run out of time before they have to quit working.
Unfortunately, the situation is set and will not get better.
So what’s the solution for us?
What can we do knowing this stuff will happen?
1. Build a better system with a pro.
If you keep making the same mistakes, you need a better system. Who builds great systems? Professionals do. Furthermore, they hold people accountable and help execute. Statistics show that people get financial advice from the wrong people, such as their spouses, friends, colleagues, etc. Don’t do this. Hire a pro to rebuild how you move cash around your balance sheet.
2. Be an optimistic realist.
Money mistakes take time to get out of – it could take years to fix. I’ve been there, done that. It’s humbling to know how much time it takes, but when you build a better system to plan and invest in, you will make it through and start making progress.
3. Win in bigger.
Once you have some wins, amp it up. Invest more, pay down more debt. Get excited and keep telling yourself that. Create hope in your financial life and feed off it. Commit to not making the same mistakes. I’ve seen some epic turnarounds in clients’ lives. It’s fun to see the systems take off and the money to start growing. Start stacking those wins.
Mistakes happen, they can suck. But use them to build a better portfolio, budget, and life.
Stay the course, and plan on crushing it.
If you are currently out of financial problems, stay that way; you only need to become rich once.
