How to Never Be Broke Again… Top 10 Life Mistakes That Keep You Poor and How To Avoid Them…
By Dwight Nichols …
A prudent man foresees difficulties ahead and prepares for them, a simpleton goes blindly on and suffer the consequences Proverbs 22: 3 (TL B) …
One of the greatest challenges I had as a young adult was overcoming a poverty mindset that I developed growing up in Prichard AL. Without ever realizing it, I had been conditioned to think a certain way about money and wealth that caused me to make many avoidable mistakes during my life.
In this special report, I list what I believe are the top 10 most common money mistakes people make that keep them poor, along with practical action steps that you can take to avoid them.
If you or someone you care about are struggling financially, there is usually a reason that can be traced to financial mistakes that were made somewhere along the way. By identifying the most common mistakes people make that rob them of their financial peace of mind, you will be armed with the knowledge you need to correct these mistakes or make the adjustments necessary to avoid them altogether.
Here is my top 10 list of the most common financial mistakes that people make that keep them poor. Enjoy!
Entering adulthood comes with newfound freedom and responsibilities, including managing money and avoiding the common money mistakes that most people make. Planning ahead and setting goals are essential elements in building a solid foundation for a stable and prosperous future. To help you navigate these important life decisions we have compiled a list of the top 10 most common life mistakes young people make. By avoiding these mistakes and incorporating sound financial habits, you can pave the way for long-term financial success.
Mistake #1
Having a mindset that put limits on your earning potential because of past experiences or current financial conditions… A poor self-image of who you are and what you can achieve.
Action: Create a wealthy life mindset… Dream bigger dreams, expand your personal vision… To reach your full financial potential, you must change your attitude and start thinking about money and wealth in a unique way…. Take the limits off your earning potential by learning how money works and start looking for ways you can increase your personal value and earning potential. Look for creative ways to use your God given gifts, talents, and experiences (your hidden treasures) to increase your income.
You must realize that your mindset/attitude, your core beliefs control the actions you take in life and hold the key to your long term personal and business success. More importantly, you must realize that God wants you to be blessed financially so that you can be a blessing to others.
Mistake #2
Financial and economic ignorance: the lack of knowledge of basic financial and economic principles, not knowing the rules that govern money and financial success.
Most financial problems in our personal and business lives are the results of making bad financial choices because of a lack of understanding of the fundamentals that govern financial and economic matters. According to the Small Business Administration, 70% to 80% of small businesses fail during the first five years. One of the biggest causes is Not understanding how to effectively manage money.
Action: Increase your financial IQ. Educate yourself on how money works. – improve your money skills– Invest in yourself, invest in knowledge and self-improvement, such as education (books, home study courses, financial groups, and mentoring programs, etc.) You can also join my online community of like-minded individuals that may have overcome the same challenges that you may face by enrolling in The Destiny Institute Basic money management program.
Mistake # 3
Laziness, not willing to work, lack of initiative or the lack of drive, chronic dependency, not taking personal responsibility for your own financial circumstances. (Blaming someone or something else for your lack of success)
Action: If you are lazy and not willing to work it is impossible to reach your full financial potential. If you are willing to work diligently, God will find a way to promote you. As a good steward (money manager) you are 100% responsible for the outcomes in your own life. The choices you make, the priorities you set and the actions you take will determine your final destination in life. You cannot blame anyone else for your success or failure.
Mistake # 4
Insufficient cash reserves: Not having enough surplus funds to cover emergencies or unexpected events. Living from paycheck to paycheck, never having any money left over for savings or to be a blessing to others after paying your own bills.
Action: Open your freedom account (aka Emergency fund, rainy day fund, your surplus account). Make a habit of paying yourself first before paying other bills. To exit the paycheck-to-paycheck life, and take control of your financial future, you must develop a habit of saving.
A good rule of thumb to assist in this regard is to have a percentage (10%) of your income automatically deducted from your paycheck and deposited directly into a separate savings account. This establishes your Surplus Fund (AKA Your Emergency Fund, Your Rainy-Day Fund, and your wealth building account). If you cannot start with 10%, take a step of faith and start setting aside something from every paycheck.
Never spend 100% of your income. If you spend less than you earn you will always have a surplus. This is a cornerstone of your financial plan. If you do not make a firm commitment to setting aside something from each paycheck, you will continue to be at the mercy of your financial circumstances. Make a quality decision here. Drive your stake to the ground. At this point, no matter how much you earn, decide to start setting something aside from each paycheck.
Mistake # 5
Impulse buying (Living above your means), not effectively managing what you already have coming in, poor budgeting or no budget at all, constantly living on the edge financially.
Action: Prioritize your living expenses and spending habits so that you always spend less than you earn. You can organize a spending plan (your budget) so that your expenses match the categories outlined in the three categories of the Destiny Institute cash flow management icon: (1) Giving, (2) Savings and (3) Living expenses. As a steward you must learn to effectively manage what you already have before you can be trusted with more to manage. Prioritize your spending into needs versus wants … Your objective is to learn how to live off 70% of your take-home income. Force all your expenses to fit in to your 70% budget program (see Destiny Institute 15-minute Budget Guide).
Make whatever lifestyle changes necessary to live off 70% of your income. This is another bedrock in building your financial plan. Although you may not be able to do this in the beginning, we will walk you through the process. Start where you are and use what you have.
Mistake # 6
Improper use of debt: Excessive debt and interest payment, not understanding the bondage of debt and surety.
The advertising and credit card industry have conditioned us to think: “earn, get good credit and make small monthly payments for the rest of our lives.” The average wage earner spends from 30 to 35% of their paycheck on principal and interest payments.
Debt by its very nature requires wealth to be transferred from one person to another. Debt and interest payments are the biggest holes in your financial budget.
Action: Use your cash flow budget statement as a guide to control your expenditures. Set your goal to live a debt free lifestyle. Organize a life plan that utilizes debt as a short-term tool that meets your specific circumstances (see Money Skills for Young Adults: “How to Get Out If You Are in Over Your Head”). Note: Keep in mind, being able to make a monthly payment is vastly different from being able to afford the purchase.
Mistake # 7
The lack of a plan (vision) to reach your long-term financial goals.
The lack of written goals (a vision of the outcomes you desire) can result in a lack of direction for your life.
Action: Write out your life goals. Money and finances are only one part of your life’s journey. You should set goals in five major areas to live a successful life: 1) Spiritual goals, 2) Educational goals (knowledge/skills specific to your gifts, talents, and passion), 3) Business & financial goals, 4) health goals, 5) Personal & family goals. (Under financial goals, be sure to include your giving goals). Make sure you keep your goals in a convenient place where you can review them weekly/monthly/annually. Remember, Planning allows you to look into the future and see the outcomes you desire. It allows you to organize practical steps to carry you from where you are in the present to where you want to be in the future.
Mistake # 8
Having only one source for generating income:
When your salary is your only source of income, you are completely dependent on someone else’s action. You are at the mercy of your employer.
Action: You must break the 9 to 5 mindset and develop multiple sources of income. Learn how to make your money (Your Surplus) work for you instead of you working for it. Allow your money to multiply through strategic investing and personal entrepreneurship.
Learn how to monetize your God given gifts, talents/abilities, and experiences to be a blessing to others. Instead of depending on one employer, consider contracting or marketing your services out to multiple sources on a contract basis. (See My upcoming course on how to start and manage your own business)
Identify other sources of income that utilize your experiences. Ask God for a creative idea on how to develop passive income. For example, identify side hustles that you can take on to provide additional income in addition to your existing salary. Look for ways that you can use your imagination to develop your own ideas for products or services (books, courses, products, trademarks, patterns, etc.) that pay you royalties and provide a source of passive income. You must maximize your revenue across all four income categories listed in the Income Pyramid as shown in the Income/Wealth Building Pyramid (see Money Skills for Young Adults: Income pyramid diagram).
Mistake # 9
Not effectively managing your own savings and investments: This includes leaving major financial and investment decisions up to someone else without your close supervision.
Not properly understanding the investments you are making, not reviewing the progress of your investments on a regular basis to make sure that your investments are in line with your long-term, wealthy life goals. This also includes not having a safe place for your surplus funds to reside (see 15 essential Money rules for achieving financial success below).
Action: Personally monitor and manage your financial affairs, savings, and investment portfolio. Never invest in investment products that you do not understand. Review your investments on an annual basis and take corrective actions based on financial and economic changes in the economy. If you have a family member or financial advisor that you trust, it is even more important that you check on them regularly. Check with other financial experts and compare the rates of return you are receiving and commissions you are paying.
Mistake # 10
Marrying the wrong person … divorce and single parent households
Marrying someone who does not have the same financial values as you have is a disaster waiting to happen. If you have a mate that is a spender and you are a saver, or if the person does not understand the principles that govern financial success, there is an automatic conflict.
ACTION: Regarding marrying the wrong person, couples must agree on income goals, spending, savings, debt reduction, and long-term life goals to be successful. You should have discussions about money before you get married. Preferably, both you and your partner should enroll in the “Destiny Institute Basic Money Management Course: A Beginners Guide to Personal Finance”.
There is power in agreement (harmony/peace) — it is imperative that you and your spouse be on the same page regarding making money decisions. Financial problems/ stresses are the leading cause of marital problems. Teamwork and cooperation are the Golden Rule for a successful relationship.
ACTION: Regarding divorce and single parent household: avoid divorce (if possible) and finish your education (especially high school) before you start your family. Statistics show that it is ten times more likely for a woman to struggle financially after divorce than a man, or if they are forced to raise their children alone. If you find yourself in this situation, I discuss ways to overcome these circumstances in more detail in my financial mentoring course.
Two Bonus Considerations
I have outlined above the top 10 Most Common Money Mistakes that people make that can negatively impact their life. In addition to these ten mistakes, there are two other mistakes that I must mention:
Number 1 – Another big mistake that young people make is Living a life without self-control and moral restraints. This includes riotous living, sexual immorality, alcohol, and drug use. Money is not the most important thing. In too many cases, when a person works hard and finally achieves a certain level of financial success, with low moral standards and the lack of self-control, their lives can still be destroyed. Even if you are successful financially without self-control and a good moral compass, alcohol and/or drugs use along with sexual immorality can not only leads to financial setback, but broken lives and broken families. I cover this area in more detail in my book God’s Plans for Your Finances.
Number 2 – Another mistake I have observed over the years, that people make that impact their financial future is not effectively managing their health along their life’s Journey. I will be covering some of my firsthand experiences in this regard in my upcoming book … “Money Skills for Young Adults.”
Your next step is to get started …
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Dwight Nichols
Author, Teacher, Financial Coach
Dwight is a former investment banker, author, teacher, and financial consultant. He is the Author of Freedom from Financial Bondage, God’s Plans for Your Finances, and Money Skills for Young Adults … He is also the founder of Urban Impact International Ministries (uimi.org) and the Destiny Institute School of Finance.
For more than 30 years Dwight has been teaching young adults (and their Parents) how to take control of their finances (See You Tube) through financial literacy education and business ownership.
In all his books, videos, and workshops, he shares on the importance of learning basic money management skills to overcome financial struggles in your personal and business life (See Personal Entrepreneurship: Preparing for Increase)
The Destiny institute Basic Money Management Course provides a structured program and ongoing assistance to implement the principles outlined in the Destiny Institute program. The Financial Mentoring Program is designed to help people who are serious about getting their financial house in order and achieving their financial independence goals.
For questions and FREE ongoing support, go to dwightNichols.com and subscribe to the Master Your Money Newsletter.
