Financially Speaking…Stupid Should Hurt

As a financial advisor I see stupid financial decisions every day. I’ve watched helplessly after advising clients not to do something, the results of ignoring that advice.

It’s painful. Stupidity should be painful. Maybe I’m being a little cruel using the word “stupidity”, but it really gets your attention, right? If stupid decisions weren’t painful, then we would never learn from our bad decisions. 

I want to talk about a few stupid decisions maybe all of us have made from time to time. Did you learn from these stupid mistakes? Here are a few decisions that hurt the most:

Poor retirement savings habits. I’m of the opinion that when I retire, Social Security will not be there or not in the form its in now. Don’t think for a skinny minute anyone will bail you out. You have to take responsibility for saving for your own future. Do it now, add to your IRA or increase your 401(k) deferrals. As Americans, we get impatient thinking that the extra $25 or $50 won’t make a difference. It will.

Paying full price. My wife is a great shopper. She does an excellent job stretching the family dollar. She really prides herself in finding a great deal. You never need to pay full price for anything. All things are negotiable to some degree. Even when I buy something online, I do a quick search for online coupons for that product. Sometimes the savings is very little, other times as much as 30%! If you don’t you, deserve wasting your hard-earned money.

Wasting your tax refund. I hear so many people go out and buy wide-screen TVs, cars, appliances and such with their tax refunds. It’s not free money. It’s your money you loaned temporarily to the Government and now they are giving it back. If you got a big refund, go to your employer this week and adjust your withholding so that you don’t owe and you don’t get a huge refund. Use the extra funds on your paycheck to add to your retirement plan at work. It’s stupid to use this as a forced savings vehicle.

No cash reserves. I first heard the term cash reserves twenty years ago when I became a financial advisor. Very few people have one. If you get hurt and can’t work, or your car needs a major repair, this account will come to the rescue. What do most people do? You betcha, they are stupid and use that credit card for an emergency. Start one today. It should be 3-6 months of your household expenses.

Maintaining an expensive lifestyle. Another incredibly poor financial decision is to maintain your lifestyle in accordance with your neighbors and overspend. Ironically, most of the people you are trying to impress are more broke than you are! Be careful, running up credit cards to maintain a lifestyle that you cannot afford is a recipe for financial disaster.

Final thoughts. Financial responsibility is hard. Stop giving in to everything your spouse or kids want. Stop making stupid purchases to make yourself feel better or keep up with your neighbors. Take my advice and reduce your expenses and save more money. I made a few New Year’s resolutions to reduce spending and save more money. I’m planning on writing another article to share my progress at mid-year.

Can you avoid stupid mistakes and live within your means and enjoy good money habits? If so, and you’re ready to get some advice, write me at david@lexwealth.com, or call me at (859) 225-2596.