4 Common Money Mistakes That Backfire
Your money mistakes can sometimes be a financial boomerang, they can unexpectedly backfire. When you are investing for a new home, your child’s education or your retirement, you need all the money you can get. You will have more money if you avoid some of these investment mistakes that have boomerang effects.
#1 – Irrationality
Save your money, make investment moves that are rational. If you trade on every bit of news you will be disappointed more times than not. By the time trading news hits public view it’s old news. And many times it can be a rumor.
So if your investment moves are based on old, incorrect information you may be wasting your money. New home purchases, college educations or retirement investing are all long-term financial goals. If you make irrational financial moves, your money may not be there for you when you need it most.
#2 – Past, Present And Future
You’ve heard it but do you listen to it? Past performance does not indicate future performance is a disclaimer used throughout the financial industry; and for a good reason. Market predictions are baloney. No one knows for certain how the markets will perform. If a financial adviser tells you they can predict the future of the market, run.
Just because boom markets have always followed poor markets does not mean that will always be the case. It’s terrific that your investments had tremendous gains last quarter or last year. Be careful though to not chase last year’s investment winners. The markets are moving targets so be cautious with your investment money.
#3 – Using Your Emotions
Our emotions can lead us into stupid behavior. We’ve all been there. We make a poor financial decision that costs us money so we refuse to reverse that decision even though we know it’s the smart thing to do. Decisions that involve money can be emotional because there is a lot at stake.
Research and then act accordingly. If you base your investment decision on facts instead of emotions you will sleep better and most likely make fewer investment mistakes.
#4 – Following The Stories
Success stories are usually misleading, many times overblown. When your neighbor tells you about the huge killing he made in the stock market listen with discretion. Avoid the common mistake of looking for evidence that confirms your beliefs. You beat yourself up for missing out but you may not have missed out on anything but a good story.
You work hard for your money and wasting it is the last thing you want to do. If you avoid using your emotions, following fancy stories and invest rationally you will keep more of your money.