Yeah, yeah… it’s tough out there, but there’s lots of times we’re not making it easier on ourselves by making some rookie errors. Here’s some things to consider NOT doing:
1. Don’t check your credit score. Less than half of Americans don’t know their credit score which means that it’s either because they are not living in the modern financial world, or they believe that Denial isn’t just a River in Egypt. Get it? Denial… The Nile. Oh, whatever. Bottom line is that checking your credit score is sort of like stepping on a scale if you know you need to lose weight. The more information you have, the sooner you can do the work to fix it.
2. Let the Universe take care of you. I call this the “zen method of personal finance” because these are the people who typically believe that things happen for a reason, that there’s always something to be learned (without really learning it), and that the Universe will provide. The Universe will not provide – you will, so get to work, you filthy hippy. And, take a shower for God’s sake!
3. Choose the wrong partner. Your maritial status and stability is a strong indicator of long-term success, and divorce or separation can be absolutely devastating to your financial independence. You need to talk about money with any prospective partner and form a plan. According to The Millionaire Next Door, a strong indicator of wealthy people is that typically one spouse plays exceptional offense, and one plays exceptional defense. It can be difficult to do both really well.
4. Set it on autopilot. Autopilot is great. It lets a machine handle all the mundane crap that can distract you from more important stuff. The problem is complacency or trusting a flawed model. You need to make periodic checks to your system and ensure that there are no errors being committed on autopilot. Think of it this way – do you want autopilot to engage multiple hostile enemy planes? If your answer is “yes,” please form a fist now and smack yourself in the face. Thank you.
5. Not set it on autopilot. The business of You is the same as any business — there is revenue, expenses, assets, and liabilities to address. Sucessful business is a system that can be operated by the dumbest person you know, which is typically you. Now add lack of sleep, terrible doubt, and unforseen circumstances that will inevitably arrive, and your autopilot system will save your ass while you can scramble to either threats or opportunities. Your autopilot system is going to get you 80% of the way there so long as you regularly reference #4.
6. Invest without homework. This is a close cousin to the Zen Method of Finance. Here’s a red flag… if you “feel” like something is a good investment, stop what you’re doing and open a freakin’ spreadsheet. You should not be feeling anything except the sensational joy of flipping the double rods to The Great American Waste of Time (most jobs) at the end of your accelerated journey through the Financial Forest of Doom. In short, if you feel like you don’t know what you’re doing, you don’t know what you’re doing, and you need to spend 80 more hours crunching numbers until you vomit. Then proceed.
7. Don’t pay yourself first. In my book (yes, there’s a book), this is the most powerful tool in the financial freedom fighter handbook. It goes something like this: do your homework, figure out exactly what you need to do to achieve financial freedom given your income and time horizon, pay yourself first. Then – repeat. There will always be dozens of methods to waste money, and if you’re not disciplined the best thing in the world is to keep your money away from You. I keep my most liquid accounts as close to zero as possible because it forces me to be constantly aware of what’s going on. As soon as dollar soldiers enlist – send them to battle immediately.
8. Pay the wrong debt. Paying debt and being debt-free is an awesome feeling, but you also need to take some investment risk in order to grow which generally means using leverage in the most meaningful way. The only time it’s okay to borrow money is if doing so will achieve a pre-determined financial goal. By the way, going on vacation with a credit card is not a financial goal. Sorry. Many people like to pay the lowest debt balance first, but the most savings/return is realized when you pay the highest interest first. Sure, if you’ve got piddly (technical term) debt balances, go ahead and clean them up, but the biggest impact will be to reduce and eliminate your highest interest debt. All other debt should be constantly subject to very best refinancing terms in order to boost your cashflow and keep your money soldiers engaged and attacking.