I’ve never liked the word “mistake” – it always seems to grate and add a lot of guilt to what is possibly just a need to learn a new lesson or correct an error in judgment. One of my favorite songs is sung by Barbra Streisand, and some of the lyrics go like this – “…there are no mistakes, just lessons to be learned.” Maybe that’s where I got this idea that, rather than heap on guilt for every single unproductive behavior pointed out to me in my life, a better approach would be to realize that every day there’s just another lesson to learn. And this so applies to financial behaviors for all of us!
Meeting with families and individuals throughout my years of financial counseling, it’s noteworthy that most consumers make pretty similar errors in judgment when it comes to managing their personal finances. Here is a list of typical unproductive behaviors that may warrant some consideration if your money isn’t working for you as well as you’d like it to:
1. You are living payday to payday without a plan to spend, or a budget.
Yes, just as our physical health requires that we have a plan of action for what goes into our bodies, our financial health requires that we have a budget, or a spending plan for every penny that comes in and goes out. Without a road map for spending, random expenses sneak into everyday living that can sabotage any good intentions. No matter how much income we have, it’s absolutely necessary to clearly think through and lay out how to spend it – it’s not the amount of money we have, but how we use it that gets us to our financial goals over time.
2. You spend more than you bring in.
Ouch! This one is a killer for any rational thinking person who wants to get close to achieving financial goals. As discussed above, without a good plan to spend (and save, which we will discuss next), you’ll most likely overspend on a regular basis. Spending more than comes in often shows up in a couple of ways – lack of even an emergency savings as well as too much use of credit. And so, our next two potential unproductive behaviors.
3. You have zero in savings for an emergency.
If there’s no plan to spend and, thus, frequent or regular overspending, then it stands to reason that you may not have determined or established a regular plan to save money, not even for emergencies. Some financial experts these days may argue that having an open credit limit of about $2,500 on a credit card is a good alternative to having an emergency savings account. But, if you don’t have a budget and are spending more than you make, then having to rely on debt building up for any “emergencies” that come along, big or small, can only lead to more financial instability and difficulty. And then there’s the issue of reliance on credit, which makes up our top four money lessons and is discussed next.
4. Using credit for day-to-day expenses.
Being granted credit is a privilege all consumers should hold dear and respect. And just because we can get credit doesn’t mean that it’s wise to rely on it daily for regular expenses. If there’s a good budget in place that allows for paying off any credit cards on a monthly basis, then maybe that works. However, using credit in this manner can also point to a lack of planning or a lack of available cash on hand to cover monthly expenditures. This takes us right back to our first lesson and drives home the idea that a plan is just essential to experience any modicum of success on our financial goals and ideals.
Whether or not any of these money lessons hit home, it’s always a good time to reassess where we are financially. In fact, watching money like a hawk payday to payday and assuring it’s used to fulfill our wildest hopes and dreams is the only way to be ready no matter what comes in life. After all, every day can be a school day if we allow it to be and money lessons are critical to our existence. Live and learn well.