3 Financial Mistakes I Made
3 Financial Mistakes I Made
By MONKWEALTH
Personal Finance mistakes are not just consequences of insufficient knowledge or experience, they’re also part of human nature. We continuously miss out on opportunities or remain ignorant to factors that may improve our financial situation, but also overspend led by emotions, compulsions, or subscriptions.
This post is about the missed opportunities and potential gains due to lack of knowledge or inexperience. Many people, especially those who are not on a path to FIRE, will find themselves doing these mistakes and not being aware of it, as some of them are not intuitive or obvious right away. However, acknowledging their existence can set you years ahead, not only on your FIRE journey, but also in life. So, let’s start!
Mistake 1) Hoarding cash
This may come unexpectedly to many, especially to those who know that I’m a big advocate of reducing expenses, aggressive saving, and frugal living. And it’s true, I can confidently say that those three should be high on everyone’s priority list, regardless of lifestyle or FIRE aspirations.
However, the thing I’m trying to convey comes after reducing expenses and saving. It’s about what we do with those savings. Not doing anything, AKA hoarding, is a trap in which many disciplined and smart, but financially illiterate people fall into without realizing. And in the capitalist society you can safely interpret that as “not reaching your potential”.
You should feel the urgency to put your money to work! In most cases, not having any risk exposure is detrimental. The only exceptions are with people preparing for a biggish purchase (i.e. a house) or people older than 50 that can save enough to buy themselves a few years of early retirement before the traditional one comes.
Increasing the number on your bank account will only leave you with a pile of cash that won’t improve your life much more than a 2 year emergency fund would. Think about it! You save a portion of your salary each month and you’re really getting into it. A few years later, you end up with a non-negligible amount being slowly eroded by inflation, year by year, not earning you a cent. Even worse, at the same time it’s too small to make any significant difference in your life, such as allowing you to stop exchanging your time for money.
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