6 Bonehead Finance Moves

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When it comes to financial success, what you do makes a big difference. Developing good habits is essential. However, there are some financial practices that can really damage your chances of financial success and freedom. Are any of these six things holding you back from your financial potential?

1. Lack of Discipline

It is easy to whip out the credit card to pay for purchases. You don’t need to actually have the money in your checking account when you live beyond your means. Credit enables you to buy what you want. Now. However, this lack of discipline illustrates underlying problems. If you do not take control of your finances, they will control you, and this will keep you from reaching financial freedom.

Create a spending plan based on your short-term and long-term financial goals, and stick with it. Get into the habit of buying things only when you actually have the money, and save up for items you can’t afford immediately. Disciplining yourself financially will eventually allow you to use your money wisely as you make more thoughtful decisions.

2. Debt

When you are in debt, you spend your time paying other people money. Interest doesn’t give you any benefit beyond allowing you to borrow. As long as you are in debt—especially consumer debt—you will be too busy paying others to concentrate on paying yourself and improving your financial situation.

Create a debt repayment plan that incorporates financial discipline so that you can get rid of your obligations quickly and concentrate on building your own financial success, rather than funding someone else’s.

3. Lack of Preparation

Part of achieving financial success is being ready to pounce on opportunities when they appear. For many who have been saving up for a down payment, and have been careful to keep their credit score high, the current climate has provided great opportunities to buy homes  at very low rates and for very good prices. Those who have not laid a good financial foundation are not able to get the same bargains.

Some won’t even qualify to take advantage of the opportunities. Now is the time to make a plan. Consult a professional financial planner if you need to, but find out what you need to do to prepare your finances, and chart a course that will prepare you for what’s ahead.

4. Inflation

The value of your money erodes over time. It’s called inflation. Without taking the proper steps, inflation can severely limit your ability to accomplish your financial goals. While there is no stopping inflation, it's possible for you to decrease its impact on your finances.

Choosing certain investments (stocks, gold) and taking advantage of particular opportunities (person-to-person lending, starting your own business) can help you beat inflation and maintain the value of your money.

5. Paying Too Much in Taxes

Our tax code is so convoluted that it's no surprise that many people miss deductions and credits that they could actually get. Others set up businesses or make banking arrangements that are horribly inefficient in terms of taxes.

While you don’t want to do anything illegal, you should evaluate whether or not you could be doing something differently to save money in taxes. Imagine being able to invest $1,000 a year instead of overpaying that money in taxes.

6. Too Many Investment Mistakes

Everyone makes mistakes. And investing mistakes can be quite common. However, if you do not learn from your mistakes and continue to engage in behaviors that result in losses, you can destroy the financial success you have managed so far, or fail to reach the next stage in the journey to financial freedom.

Costly mistakes like trading too often and paying expensive load fees, as well as taking “inside” tips on risky investments, can eat away at your returns. Instead, look for low-cost investments with solid fundamentals, and create an investment plan and try to stick with it.

—For more ways to save, spend, invest and borrow, visit MainStreet.com.

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