4 Ways NOT to Make Progress With Your Money
This year, adults in the US listed financial stress as their #1 source of anxiety. Given that tough climate, we're all doing what we can to better our situation! As we do, though, there are some traps along the way - including four major red flags that sound like good advice, but will likely leave you right back where you started.
Watch out for these four...
1. Mistaking frugality for financial savviness
If your entire financial plan is shopping sales, clipping coupons, hunting for bargains, and never getting more than a small coffee, I have both good and bad news for you...you're fooling yourself. You cannot worry your way into a happy, confident, and fulfilling financial plan for your life. On the flip side, there are better ways to actually achieve the goals you're working toward!
Having a roadmap where you're in charge - not the number in your checking account - makes all the difference. Many people think that the skill of being good with money means constant restriction, but that couldn't be further from the truth. If you have a solid big-picture plan, that can include both your big savings goals AND spending on what you love - it doesn't have to be either/or.
2. Relying on financial advice you've heard all your life
In 2013, the University of Cambridge conducted a study that determined: the majority of adults' behaviors and attitudes toward money are established by the age of seven.
Seven! I don't know about you, but I wouldn't trust my seven-year-old self to choose a career path or a life partner, let alone manage my money.
We pick up SO much from our families and how we saw our parents act around money growing up. One of the ways this stays with us is in the form of advice: where, how, and with whom you grew up drastically changes the money mindsets you've inherited. That's why it's so important to recognize the phrases we grew up hearing about money, and evaluate whether they're helping or hurting us today.
What money mantras do you believe are true? Are those habits and beliefs serving you in your life now? Do they still fit with your lifestyle, career, and economic status now?
3. Blindly following popular financial tips...
...without considering if they're right for YOU and your big picture!
Envision this:
You're getting miles on your favorite credit card every time you spend.
You drive a great car you recently chose, based on how the monthly payment fit into your budget.
You're transferring money to an investment account.
That description could apply to someone in a healthy, stable financial situation...or it could describe someone in deep debt and financial anxiety.
Sometimes, the tips you find on the internet are not helpful and do not apply to your situation.
There's a LOT of financial advice out there...and if you skim the surface, read a few articles, and follow a few social media accounts, you might have convinced yourself that because you're following the advice that comes across your feed, you're doing great. But it totally depends on your situation.
For instance, potential dark sides to the examples above:
If you're getting 2% cashback on a card, but paying 19% or even 29% interest on hundreds in credit card debt a month, this is a bad deal for you.
Will an increased car payment have you giving up progress you'd like to make on other goals - like traveling, renovating your house, paying off debt, or splurging on the holidays? How do you even find out the answer to those questions?
In what manner are you investing, and are you taking advantage of the tax benefits available to you? Is the rest of your financial situation stable enough to prioritize investing? Is the money you're transferring into your 401k even making it into investments, or is it just sitting in cash? Someone trading hot stocks in Robin Hood while they still have credit card debt, and someone who has a solid investing strategy in tax-deferred accounts are in very different situations.
4. Using a monthly budget
This one's a 🌶️ hot take 🌶️...but here at Arise, we maintain that monthly budgets don't cut it.
Viewing your whole financial life just 30 days into the future leaves you with blind spots and stumbling blocks as soon as something "out of the ordinary" (or sometimes, even just "out of the monthly-ordinary") comes up.
What's the alternative? A cohesive, overarching financial plan that scales up to preparing for goals decades away and yet all the way down to normal daily spending.
Conclusion
Making financial progress can feel like "two steps forward, one step back". However, avoiding these four pitfalls - mistaking frugality for savviness, following unexamined financial advice, sticking to popular tips that might not apply to you, and keeping your view limited to month-to-month - can truly help you accelerate your journey.
Not sure what's next? Get expert guidance, including the practical alternatives to each of these pitfalls - and much more.
Get the Money Momentum System customized for your own life: book a free call with Coach Nicole or Coach Annie to find out if Financial Coaching is right for you.
Cheering you on,
Coach Annie
