Are you unsuccessful because of a wrong, rather a bad decision? In this post you will come across the top 3 common mistakes people make whether knowingly or unknowingly. And the best possible solution is also suggested to the best of my knowledge.
Making mistakes is not a problem, human beings do make a wrong decision sometimes because of insufficient knowledge, sometimes knowingly out of peer pressure, or several other reasons.
There is a very popular quote saying “Never make a promise when you are happy, Never make a decision when you are sad”.
Note: This blog post is super informational and beneficial for you, as I am covering a lot of knowledge in this blog. Read it till the end and take the key points with you and act on it.
These are the top 3 common mistakes people make and the best possible solution to my knowledge.
House
1st out of the 3 common mistakes people make is buying a house.
Buying a house is not the problem, the problem is people buy a villa/mansion even when they have funds only for an ordinary house.
We should buy a house only when we have enough resources to afford it. Yes I understand owning a house is a necessity and no one can deny the fact.
When should you rent a house?
Here are some quick tips for when renting a house is more logical than getting into debt and buying a house in lump sum.
- You have a pay cheque to pay cheque job and no sufficient savings.
- You are starting a new business and want some emergency funds.
- You have frequent transfer in your job.
- You want to start a new business and need funds for the cash flows.
When should you buy a house?
Sometimes we have certain situation when buying a house is more beneficial than renting, here are some of the real case scenarios:
- When you could pay installments and at the end of the agreement, the property will be transferred to you.
- When you have funds and you want to invest but don’t have good return on investment.
- When you have good finance options available.
- You could get a great deal near your business.
Other common house mistake people make
Whether we own a house or rent a house, there are some mistakes people make that result in improper utilization of funds, rather a wastage of funds.
1. Over expenditure: Whether you are an owner or tenant, everybody makes this mistake.
We spend on those things which are completely unnecessary. For example: investing on the refrigerator of 1000 liters when we have requirement of 500 liters only.
People think they must get the best of the best material. Whether you take wood, floor, cement, or any other material we use. The thing is companies usually take lot more money on the name of these gimmicky features but no real value.
2. Non-maintenance: Making a house is easy, as it takes a one-time effort. Maintaining it is a difficult task.
We should take care of certain things when we talk about maintenance.
- Maintenance doesn’t mean complete renovation.
- Any fitting or machinery relating to the safety of our family must be maintained at proper intervals.
- A proper budget must be formed.
Which items need proper regular maintenance?
- Elevators
- Escalators
- Security Alarms
- Security Cameras
- Fire extinguisher system
- Gas pipeline system
- Air conditioners, and many more.
3. Renovation: Proper renovation must be done for the safety of our family, or to keep the house in good shape. Renovation at the correct time will save a lot of money as compared to sudden huge renovation.
View U.S house statistics: HERE
Debt
2nd out of the 3 common mistakes that people make is debt.
I apologize to sound a bit theoretical. Just go through it once and you will understand the demerits and merits of a debt.
People usually think that what the big deal is if they just take a loan and repay it later. After all, they are earning pay cheque to pay cheque every month. They will repay it as soon as they will earn.
If you look at the statistics:
- 97% of bankruptcies are filed by individuals.
- 5% of bankruptcy cases are attributed to reckless spending.
- 62% of personal bankruptcies in the United States were due to medical expenses.
When we take a loan, obviously we have excess cash flows than we could have. So, human behavior tends to spend more when it has access to more resources.
Surprisingly this also leads to our 3rd common mistake that people make i.e. “Savings”.
We must create an emergency fund for the emergency which must be used only when it is needed otherwise must be kept untouched.
Illness, health issues, or disease never comes pre-planned. So if we don’t save for them today, we will suffer tomorrow.
In my opinion, spending more would not be a problem if we spend what we own. That too in a planner manner. Spending unearned income can never end up good if spent on consumables or perishable items.
I suggest you should create a budget and spend on it logically. This is a great habit of successful people that they create a budget before they spend.
when it comes to spending, we have two choices either invest in assets or spend on liabilities.
Assets are goods that will give return in the future, but liabilities are those expenditures that don’t give any return in the future.
Try to spend the majority of your earnings on assets. If you run your business, save an emergency fund also for business use.
I desperately want to help the millennials of our generation to have a bright future, and that is why I started this journey.
Remember: “Debt is a dual-edged sword, if it helps in higher profits, it multiplies the losses as well.”
Saving
This is the 3rd common mistakes that people make
Do you remember the old days when we used to save to buy that particular chocolate or ice cream?
After saving a good amount of money, when we look back, that feeling is above the world.
We all understand the value of saving, savings gives us the peace of mind that if anything didn’t goes our way, we have sufficient resources to manage that.
I agree earning gives us the freedom to spend. But earning a certain amount takes time and effort. Only savings are the best way to get that stability at bad times.
How much do you save?
Ask this question to yourself. what is your dream car? dream house? dream vacation? And more important what actions are you taking to get that dream come true?
Daily put in the hours, hard work, dedication, and ya, some love too. Together with a pinch of savings you will definitely reach your goal for sure.
How much do you need to save?
This completely depends upon you. What your goal is? I can just help you with the road map you need to follow.
Here is a quick 3 step blueprint to achieve any goal.
1. Limited number of goals
Jump to Focus on your habits
Many people start accomplishing too many goals at once. but this is a mistake they make.
Ever thought about why we never achieve our new year’s resolutions?
I will tell you the exact reason. Our brain is designed to seek comfort. Resolutions are generally meant to stretch at least some of our limits.
We take tons of resolutions in a single day and expect our minds to cope up. Seriously!
Habits we made in 10’s of years, we expect to break overnight.
The brain takes a lot of effort to break even one habit because it drags us out of our comfort zone and our brain resists that.
So, from here we get our first step to achieve our goal i.e. We should set a limited number of goals and prioritize between them.
2. Focus on your habits
Jump to Consistency.
As we discussed in the previous point, we need to break our bad habits and develop new good ones in their place.
Habits create identity.
Think about your current habits and how you feel about yourself. Are you habitual of procrastinating, drinking alcohol, or any other bad habit?
These habits give you negative vibrations and you feel miserable about yourself.
You should develop good new habits in place of old bad habits.
Now the question arises how to break a bad habit?
Breaking a habit is a 3 step process. Starting from a trigger
- Trigger
- Behavior
- Reward
Step #1 Identify the reward.
When we repeat a loop, then only a cycle is called a habit.
The first step we need to take is identifying the reward that we get from that habit and finding an alternate habit we can develop which is equally or more rewarding than the current habit.
For example, getting tired is a trigger, running to get a coffee is our behavior and the reward we get is we become active.
From this example we understood that to get the perky active feeling, we ran to get a coffee when we feel tired.
We cannot stop being tired, nor do we stop to expect any reward. What we can change is the behavior.
Step #2 Behavior
Once we have identified the reward drives us to act upon the trigger, we can better understand the behavior.
If the reward you’re seeking is an active feeling, and also you need to reduce the number of sugar coffee you drink. Try drinking some black coffee instead of sugared coffee. Or drink a quick healthy juice. You can also try some quick workouts like push-ups, sit-ups, etc.
In this way without compromising the end reward which is active feeling, we changed our loop cycle and developed a healthy and better habit.
Step #3 Repeat
Once we’ve changed our loop cycle, we need to practice the same behavior for a repeated number of times before we successfully develop our new habit.
How much time does it takes to create new habit?
Creating a new habit is not the same for every habit and every person.
Some simple habits like drinking 8 glasses of water every day take approximately 21 days. But some complex habits like working out 6 days a week and also enjoying working out take approximately 210 days.
3. Consistency
Once you have created your goals and developed your habits, the next most important step is consistency.
You know, what is the difference between successful people and unsuccessful people?
“Unsuccessful people start a task but never end while successful people start the task and end it at any cost.”
Majority of the time our goals are long term which means our ultimate goal will complete after say 2, 4, or 10 yrs. So how to make sure we achieve our goal at the end of that period?
Yes, you guessed it right! Consistently moving towards the end goal in a planned strategy.
What qualities does a person needs to maintain consistency?
Discipline, positive thinking, and hard work are significant qualities that are must-haves. Not all day you have the same energy, nor you will be motivated all the time. This is human nature.
In that time when you feel demotivated, you need to remember the result you started for and make the process enjoyable.
How to be consistent?
1. Journal
One simple method is to write a journal daily to keep a record of your progress.
2. Start very small
Divide your long-term goal into small short-term goals.
3. Accountability
Once you have set your goals, you need a system to check whether you are moving towards your goal or not. If you observe any drawbacks, correct them right away.
4. Take action
Stick to the plan and take action with high energy. The first thing in the morning you should do is take action. You will win half of the battle there only.
5. Reward
When you do work hard and accomplish any of your short-term goals no matter how small or big they are, celebrate them and move forward to the next goal with even higher energy.
Conclusion
These were 3 of the many common mistakes people make, I hope it helped you in some way and threw some clarity on those topics. Apart from these mistakes people also make some other common mistakes which we will be discussing in the other blog post.
Humans, as you know have mind which makes them different from animals. First plan and then execute.
you can share me your own story on deepdiveinfinance@gmail.com and your story can be featured on my next blog post, I will be sharing new stories so that you keep getting new insights and different mistakes people generally make that you can avoid and learn from their mistakes.
Also read: 10 must read quotes of Bill Gates
