When you look in the mirror do you see an ally or an enemy for many people the
person staring back at them in the mirror is the number one reason for all
their financial troubles but guess what they don't have to be knowing where
you're going wrong financially and what to do about it is the first step to
starting a new chapter in your financial life and as such in this video i will
share with you five money mistakes you must avoid at all costs mistake number
one mismanaging debt there are some pretty contentious subjects in the world
of finance like cryptocurrencies and subprime loans however one topic that
will be debated over forever is debt for some debt is the devil and for others
debt is seen as just another tool in your financial tool about in fact you
can like in debt to another tool we regularly use which is a knife when you
use it properly it can help you cut things faster but when you use it wrong
it can leave you missing a finger or two thankfully i don't know this from
personal experience so like a knife that can be good or bad depending on how you
use it for instance taking on high interest debts to buy consumables
depreciating goods is never advisable this is why you should be steering clear
both credit card debt and auto loans however there are instances where taking
on debt makes sense think taking on loan to cash flow your business or applying
for a mortgage when you go to buy a home whenever you take on any form of debt
two factors need to be in play first the interest on your debt must be low paying
interest charges is the worst way to spend your money if you ask me so
keeping these charges at a minimum is key second you should only be using this
debt to acquire appreciating or cash producing assets this is why you see
people taking on mortgages which is a form of debt to buy rental properties
that both make the money every month and appreciate over time mistake number two
overreaching on your home purchase buying a home is the most life-changing
purchase of your life but not for the reason you think i don't mean it's
life-changing because after buying a house you wake up the next day as a new
person i mean the purchase of your home can either set you in the right or wrong
financial direction for the foreseeable future for 99 of people the purchase of
their home is the biggest one they will ever make and this statistic is only
getting stronger as home prices continue to soar unfortunately these home prices
are positively correlated with the rise of a home being a status symbol in the
world we live in today from what i see around me owning a fancy home now
carries as much status as owning a new sports car or a boat and this is a major
issue as you've probably experienced yourself people are going to judge you
based on the size and appearance of your home there's really no getting around
that in the world we live in today unfortunately there are a lot of people
who take this judgment extremely personally and as such will not accept
buying a home that won't impress their family and friends but doing so can
cause a host of undesirable financial issues first of all overextending on
your home purchase is going to mean paying more interest on your home over
the long term for instance taking on a 500 000 mortgage versus a 300 000
mortgage at five percent over 25 years will have you paying over a hundred
fifty thousand dollars more in interest over the course of your mortgage's life
for most people that's years of after-tax savings gone out the window
for a home that was bought simply to appease the people around them keep in
mind taking on more house than you need will also strain your monthly cash
situation a 500 000 mortgage will have you paying twenty nine hundred dollars
in mortgage payments compared to eighteen hundred dollars with a three
hundred thousand dollar mortgage if you invest that difference for the course of
a mortgage at the historical s p 500 market return of seven percent you'd
have almost nine hundred thousand dollars and still have a house paid off
as well finally if you do over buy chances are you're gonna feel some
mental repercussions as well you probably won't like it when all of your
friends are going on vacations or having lavish weddings and due to your massive
mortgage payments you can barely afford a night out at mcdonald's therefore do
yourself a favor and always buy within your means mistake number three not
starting when i was back in high school i hated homework i'm sure that makes me
no different than every other past and present student but the one thing that
got me through all those grilling hours of readings and exercises was the sooner
you start the sooner you're done while the bulk of your studying days may be
behind you i have a feeling the saying could be very useful still in your own
financial life i hate to say but probably the biggest issue most people
face when it comes to getting their finances in order is simply not starting
their logical brain tells them that they should be paying down their debts saving
and investing but when push comes to shove nothing gets done it's kind of
similar to getting healthy we all know that we should be working out and eating
right but when that 5 am alarm goes off not a single weight is lifted and the
quest for better health is pushed off for one more day similar to starting a
fitness regime delaying financial action will have more consequences on your
future success than you think first it goes without saying that without
starting you're never going to gain the experience in education you need to be
good with money no one starts off as a master investor and even people like
warren buffet and ray dalio are constantly refining their skills to stay
cut above the rest second when you put off making any financial improvements in
your life you make starting a tad bit harder this is because you allow
hesitation to set in and cause the activation energy for the activity to
increase it's kind of like how it's easier to work out right as you get up
because if you leave it until later in the day the dread sets in and all of a
sudden you're too busy to get a good sweat on finally we can overlook the
importance of time on your wealth building success if you invested 500 a
month from age 18 to 70 you'd have over three million dollars when all is said
and done if you wanted to reach this same investment figure and push off
investing until 40 you'd have to contribute five times as much money on a
monthly basis or roughly 2 500 therefore unless you already have
endless amounts of money then you're gonna want to have time on your side
mistake number four relying on a single source of income if i had to guess i
would say that your parents wanted three things for you when you grew up first
they wanted you get a good education second they wanted you to get a secure
well-paying job and finally they wanted you to find the partner of your dreams
did i get it right well i hate to break it to you but most people put way too
much reliance on that piece of advice and this can result in terrible
financial consequences over the course of their lives now you may be wondering
what's wrong with getting a secure high-paying job well let me share with
you another one of my favorite things which is it's all good until you get
caught kind of like when you and your friends thought it would be cool to
drive alone on your learner's permit everything was great until you saw those
bright lights flashing behind you well the same oh [ __ ] situation can happen to
you if you don't see past many of the flaws of relying solely on a single
source of income the first reason you don't rely on a sole source of income is
because it will significantly hinder your financial progression it's kind of
like the saying two heads are better than one well two income sources or more
works in the same way chances are right now your current income progression
model looks like this you have a steady job you work hard and collect your
standard three to five percent raise every year a few times in your career
you will snag those more lucrative jumps in income when you get promoted
otherwise your income growth is beholden to those annual raises is there anything
wrong with this model yes of course there is or else i wouldn't have brought
it up in the first place this method of generating income fails in two regards
first it takes your financial progress out of your hands and puts it into those
who pay you if you work for a great company with a promising future then
sure things may work out but this is not going to be the case for everyone as
such those raises you were expecting to keep you moving forward financially may
come to a screeching halt end if that is the only way you're raising your income
year over year then that is a major problem second of all the math doesn't
add up when it comes to getting ahead financially while employing this
widespread income model sure you may be collecting that three percent raise
every year but for some reason bread milk gas and everything you routinely
buy continues to increase in price as well it's at this point that you have to
ask yourself if you only perceive yourself moving forward or if the math
supports this reality the second major reason you need to develop additional
income streams is that even in the most seemingly promising situations your sole
income source is never guaranteed to be there case in point the kova 19 pandemic
40 low-income workers lost their job at some point during the crisis and if you
think that your higher status position will save you think again families
making between 40 000 and a hundred thousand dollars and hundred thousand
dollars and above both saw job losses at rates of nineteen percent and thirty
percent respectively therefore if you wanna defend the integrity of your
income and make meaningful progress in your financial life then building new
streams of income is a no-brainer mistake number five being ignorant to
investing fees so you took my advice from mistake number three and started
investing well done however don't walk in your retirement plans in mexico just
yet because there's a culprit out there that is looking to push your timelines
to sunny paradise if you've had your eye on the world of finance in the past year
you've probably come to notice that the general interest in investing in the
stock market has been a new record highs and to me this is great so many people
for years have overlooked the power of investing in compound interest and are
finally waking up to the realization that this is by far the most important
tool that they can use to build true financial wealth however many people
fail to understand that part of this progress is being hindered by wealth
crippling fees for most people their path to investing goes as such first
they are either unaware of the benefits of investing or are too scared to get
into the investing game the second step is diving in and usually this takes
place in the form of hiring an active money manager to handle all their
investing needs sadly these individuals feel as if they are doing well by their
finances and some are but sadly most aren't and this is due to them
subjecting themselves to exorbitant high fees the average actively managed fund
has an expense ratio of around 2.5 percent that's a small price to pay for
someone to manage your money right no no it's not if you were to invest a
thousand dollars a month for the next 30 years you would end up handing over 500
000 in fees if you can live off 50 000 a year in retirement that's 10 years worth
of expenses you're handing over to have someone manage your money but at least
the advisors who are collecting your half a million dollars are getting you
superior performance right not quite let's take the warren buffett
protege partners bet where the two sides spend a million dollars on active versus
passive funds to illustrate this point the two sides bet that their investment
choice would yield the greatest returns over the course of a 10-year period
buffett selected the s p 500 as an investment vehicle of choice whereas
protege partners selected five actively managed hedge funds the result even
after a slow start due to the 2008 recession buffett and his index fund
smoked the hedge funds by yielding a total return of 125.8
over 10 years versus just 36 percent from the hand selected hedge funds and
what is the cost of investing in the particular fund that allowed buffett to
win that bet you can invest in the same fund for just 0.2 percent therefore high
cost doesn't always mean high performance which is exactly why you
can't afford to remain ignorant to the investing fees you may be paying hey it
looks like youtube thinks this next video is the one that will change your
financial life forever give it a watch and let's see if they're right