We all know people who can’t seem to make any good financial decisions – ever. We all make bad ones occasionally. I know I have made my fair share of shaky ones. When you are in the moment, making the decision, it most likely seems to be the best. It is only later that you think about other options that could have been available and which you may have chosen. Train yourself to think through available options and their consequences before making that decision. You will get better at good financial decision making.
Here are 6 decisions I have seen people close to me make, that turned out to be v-e-r-y wrong.
Living above your means.
Spending more than your income provides seems to be a common condition in America. It is so easy to incur debt and keep deferring payment. That path leads to financial failure for most. Lifestyle changes are easy to make on the way up, harder to swallow on the way down.
A relative of mine gradually lost income and assets over a 20 year period, having lifestyle downsizing forced on him multiple times and in multiple ways, from loss of cars all the way to loss of hot water for showering and money for food. Planning ahead to project your needs is important. Once you plan what you need you can start figuring out how to fill that need.
Not cashing that check from your mutual fund company.
A hoarder I once visited left uncashed mutual fund dividend checks laying around on the already littered living room floor. Granted, they were for very small amounts – such as $1.25, but not cashing them had big consequences. The mutual fund company, after several attempts to contact him, was required by law to escheat the assets in the fund to the state as ‘lost’ money. The hoarder subsequently tried to reclaim the money, but was unable (or perhaps the better word is unwilling) to satisfy the state’s requirements to do so. Tend to your affairs to keep them humming properly and avoid complications.
Not paying your real estate taxes.
An acquaintance of mine inherited a 4 bedroom/2 bath home free and clear of any debt. This person lived in the house for many years, enjoying it along with the money he inherited from the same person. He refused to get a job, find a roommate or develop any source of income. Eventually he could not pay the real estate taxes and the home was put on the county’s tax lien sale auction. He ended up losing the home for want of a few thousand dollars. Remember that what is yours, really isn’t. If you don’t pay the taxes, you lose.
Waiting for a job to come to you.
A friend of a cousin was laid off back in the 1990’s. She wouldn’t go out and find a new job. If one came to her (which surprisingly one did – twice), she would work at it halfheartedly and eventually lose the opportunity. Opportunities abound, you just have to tune in to them and seek them out. “All things come to he who waits (and worketh like hell while he waits)”.
Giving away money you need to survive.
Generosity is a fine thing, but the old adage “Charity begins at home” is very appropriate for some. I know a person that gave away so much money that she is now destitute and using food banks to live. Take care of yourself first and you can help others much more and for longer periods of time.
Not being ready to make changes.
In 2012, Ramit of I will teach you to be rich, posted “Who do you know that consistently makes the worst financial decisions?” One reader commented:
“From experience, I’ve found that all my financial issues had roots in something psychological going on inside of me – so until I cleared that up, I was NOT going to listen to anyone else or even admit I had a problem.”
With a certain relative of mine, I have offered suggestion after suggestion on ways to live within her means, to get income or to deal with issues – all ignored or twisted wrongly. She is not ready to make changes or get help. Until she is, nothing I say or do will help her. It is truly frustrating and stressful for the people who care about you to watch as you go downhill and get yourself into trouble. Get help.
What financial decisions have you seen that turned out to be oh so very wrong?