There's something to be said about the value of taking your finances into your own hands and working to create a better future. At the very least, it's one of the most admirable things you can do for yourself and your family. It's impressive.
That being said, there's something to be said about intention and execution. Though you might intend on saving money, investing it wisely, and maybe paying down debt, the truth is that it's not always that easy to do.
In many cases, people who end up trying to do right by their interests end up failing miserably. More often than not, it's the mistakes people make with their money that causes investments to fall through.
Want to avoid the fate of the broke investor? You're not alone. Here are the most common gaffes you need to avoid.
Thinking You "Don't Have The Money" To Invest
There once was a time where investing meant that you had to have an extra $500 to $1000 saved up before you could even get started. Then, you'd have to make an account with a stockbroker and have him do all the trades for you—often at a price of $20 a pop.
Now is not that time. There are now plenty of apps for micro-investing individuals that can't afford to invest more than pennies at a time. There are no-fee trading apps like Robinhood, and apps that allow you to buy fractions of shares, like Stockpile.
You have no excuse not to invest now. The worst of all mistakes people make with their money is assuming that they don't have the cash necessary to invest.
Getting Pressured Into Investments You Don't Believe In
Due to the fact that investments are no longer sold the way they were in The Wolf of Wall Street, this is now one of the less common mistakes people make with their money, but that doesn't mean it still doesn't happen every day.
When you have money—any amount of money—you will have people who want you to part with it for their own gain. It could be a shifty-eyed financial planner who wants a higher commission, or a "friend" who wants you to invest in their business without a business plan. Or, it could be a total stranger.
Either way, people will want to pressure you for cash and they will do a lot to make you part with your money. Sadly, part of getting wealthy is learning the art of saying "no," and learning how to shut people out when they don't accept their answer.
Caving will generally mean that you'll be stuck with an investment that goes nowhere. You'd be better off flushing your money down the toilet than giving these people your money in many situations.
Not Looking Before You Leap
Due diligence is a thing, you know! Investing willy-nilly will not get you good returns, and in many cases, will open you up to being scammed as a result of your folly.
Before you make the decision to invest in anything, make sure you know what you need to know about the investment. What are the risks? Is it backed by the government? What guarantees do you have? How is the health of the company? Is the investment legit, and what proof do you have that it is?
The more you know, the safer you are from loss and the less likely it is that you will invest in something that will collapse.
Not Taking Timing Into Account When Investing
Though "timing the market" should never be something you try to do, we'd be lying if we didn't say that timing didn't play a role in investing. You do have to take a look at current events to make sure that you're making a smart decision at that point in time.
For example, if you are looking at steel stocks, you might not want to invest in them during a trade war with countries that manufacture steel. Or, if you're not sure you will be able to keep your job, you shouldn't buy a house.
Certain kinds of investments are going to be less time-sensitive than others. For example, buying an investment property when a real estate bubble is about to burst isn't a good idea and may actually bankrupt you before it could even turn a profit.
Believing Ignorance Is Bliss
Investing, and really, money management in general, is not something that you can ignore. Refusing to invest is the easiest way to make sure that you won't retire, and that's pretty terrible. By ignoring the issue of needing to invest at all, you're shooting yourself in the foot.
Though most people know they are in need of a retirement account or an investment portfolio, they just grin and hope things are going to get better. This is obviously one of the worst mistakes people make with their money. Ignoring things never makes things better.
As rough as it is, you do need to take stock of your situation and work your way out of it. Otherwise, you will end up losing money in major ways.
Emotions and investments are really not supposed to go with one another. People get emotional, and then they do stupid things. Investing while scared easily causes hair trigger sales that lead to losses. Investing while overconfident can make you buy things that really aren't legitimate.
Don't use your heart to guide your emotions. That's one of the easiest mistakes people make with their money, and unsurprisingly, also manages to cause a lot of panicking and loss.
Forgetting Your Emergency Savings
Though investing is great and wonderful, there's something that's even more wonderful than investing. It's having a small emergency savings account that you can rely on when times get tough.
Investments can crash. They can turn into nothing very quickly, and all it would take is a stock market crash. Sadly, most of us are not going to make the best stock market trades in history—which means that those crashes can be serious doozies.
You need to have emergency savings in a separate account, and you should never invest your emergency savings.
Choosing to Ignore Debt
Believe it or not, paying off debt can be a form of investment. That's why one of the worst financial mistakes people make is ignoring their debt while they keep investing in conservative items that have low returns.
If you have credit card debt with high interest rates, making the minimum monthly payments will end up costing you extra over years. Rather than drag your feet paying off debt, think about the fact that paying off debt prevents a net loss on investments.
If you have $1000 in debt at a 22 percent interest rate, and have $1000 in an investment that pays 4 percent per year, you're losing money at a rate of 18 percent per year. We're not even going to start on how that impacts your credit score.
Expecting Others to Invest with Your Best Interests in Mind
In the past, many people just expected other to do well by them—and for the most part, they were able to do so without worry of poverty. This was especially true among women who lived as housewives.
Unfortunately, you can't trust people to do right by you anymore. In fact, there's no saying that you will even have a spouse willing to support you in 10 years, even if you do get married.
The sad thing is that you can't even trust wealth management companies to do right by you. Due to the laws governing investments, they often are incentivized to have you invest in things that aren't always good for your best interests.
Times have changed, and that means you're going to have to adapt. You need to take charge of your own money. Otherwise, you're going to be pretty doomed.