Avoiding bad financial decisions is as important as making good ones, but what influences you to make such good or bad financial decisions?
Your decisions are a reflection of your financial habits i.e. a reflection of who you are as an investor and as a person.
Investing in things you don’t understand.
It amazes me that with the ability to do a quick search online that many investors are still putting their money into investment products and they don’t understand how they work. I talked to dozens of investors who have invested a large chunk of their life savings into something that they couldn’t explain to a friend or neighbor.
Emergency Funds.
The inevitable will happen. And that’s why emergency funds exist. The thing is, everyone has a big financial emergency at some point. That’s why you need to prepare.
It’s a fantastic idea to have many months worth of expenses in your fund. Some people have three months, others have 12. I think you should have eight months, but choose an amount that makes sense for your situation.
Not Budgeting.
The term “budgeting” often leads to frustration and unrealistic expectations. So let’s give the budgeting process a more empowering name — it’s a “personal spending plan”. A personal spending plan provides awareness of where our money is going and helps us prioritize financial decisions. Budgeting is not just for those struggling to make ends meet. Everyone needs a personal spending plan and your plan needs to be more than just a loosely defined set of good intentions — your plan should always be written down.
Not Investing In Yourself.
This is the most dangerous of all, because not investing in yourself makes you backward and outdated, the greatest of all investment is an investment in oneself, because when you invest in yourself you learn new things, your thinking becomes renewed, you skills are upgraded thereby causing an increase in your income.