It is unfortunate to know that the biggest reason people exceed their income and incur debt, is merely to keep up appearances. Always try to understand your motivations to spend money even before you do, and then decide whether this unnecessary excess is worth ruining all your prospects of financial independence. Do not buy, a car you don’t need, or house you cannot afford, or even have a child you are not financially ready for, just because your peers are doing these things. These are good things to have, but are all responsibilities that you have to plan for financially first.
3. Not having a financial plan: This should be the first thing you figure out as soon as you start earning an income. Mapping out your journey to achieve pre-determined goals: income, expense and investment goals, and deciding on financial milestones to look out for along the way. It has been famously said that the person who does not know where his next dollar is coming from, usually does not know where his last dollar went. I will also add to this by saying that the person who does not know where his last dollar went, will soon not know where his next dollar is coming from.
4. Putting off attaining financial Independence. This dependence is characterized especially by leaning on family or friends for a bailout every time you spend more than you make. One should never spend money before they have earned it. The sooner you learn how to manage your finances the better off you’ll be. Assuming responsibility is the surest way to become responsible.
5. Falling behind on payments. This will often mean that you are paying more at the end of the day because the interest on your debt grows and there usually will be penalties if deadlines are ignored. The longer you defer your debt, the more of it you will have to pay. This will in turn force you to keep acquiring more of it, and one can easily get stuck in this vicious circle for their entire working life.
6. Investing in everything but yourself. Just like quality investments yield better returns, improving oneself increases your capacity to earn. Always position yourself to earn more, by getting a continual education that increases your skill set which increases your demand in the job market.
7. Investing too casually. This is when investing has taken a backseat to what we deem to be more urgent demands. Invest early and often, even if they are small investments. Compound interest and Time are your biggest allies in building wealth, start now, it cannot wait. Properly planning and setting goals for when you want to retire and how much money you will need, will help increase the urgency you have to start investing seriously.
Many of these ideas may not seem particularly catastrophic immediately, but if they are allowed to become patterns we get stuck in, they will greatly affect any prospects of financial freedom in the future.