7 Financial Mistakes That Hinders You To Be Rich

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You know what’s bizarre? Our time is most consumed by trying to produce mainly one thing, MONEY. And unfortunately, money isn’t something we take the time to fully understand and learn more about, which can really lead into financial mistakes down the road that can make you the opposite of rich.

So, Today I’m going to be showing you 7 Financial Sins that will keep you poor, how not to get caught in them so you can instead actually set yourself up for future success. This article is going to be showing you an analysis of each of the 7 financial sins and what exactly you need to know about their specific effects towards you. Make sure you read this article till the very end because I guarantee you, this information will change the way you think about life. Now let’s get started.

1. The first financial sin is not developing a Financial IQ.

Schools mainly teach you how to work in a job but not too much how to get rich. There’s a common habit among most people I’ve seen myself coming out of college. They start to work, earn money and then usually spend it all. You see, money is a multiplier for whatever habits you already have with your personal finances. This has been seen with a lot of Athletes who get huge contracts, make millions, but they lack Financial IQ, and at the end, they somehow end up bankrupt.

This is why it is extremely important to develop your financial IQ because it’s shifts your way of thinking of how to properly handle your money and avoid long term consequences. So what’s the Solution in order not to fall in this financial sin? Well, the obvious answer is you need to increase our Financial IQ

To start off, Financial IQ is composed of 4 different parts.

  • ACCOUNTING: understand financial statements.
  • INVESTING: The science of money making money.
  • UNDERSTANDING MARKETS: supply and demand; technical and fundamental investments
  • LAW: Understanding taxes / avoiding lawsuits.

Ignorance is not bliss in terms of not knowing how you’re paying more than you should. I started with this book called “The Total Money Makeover” by Dave Ramsey, its super straight forward of understanding the smart strategy and direction can be doing with your personal finances so I highly recommend if you get the chance, to get the book and read it.

2. Investing into Liabilities instead of Assets

By definition, liabilities are things that take money out of your pocket, much like a leach does their victims when they suck blood. Assets are the opposite in which they are things that put money into your pocket without you having to work for it. Now that you know what they mean, how can you understand this to better to help you avoid losing money with liabilities?

Well, for example, let’s take a look how expensive luxury cars can be a classic liability that many people try to invest in. A famous millionaire real estate investor and sales trainer, Grant Cardone, once talked about how unwise it is to purchase exotic cars at an early stage in life.

Going as far as calling it as the dumbest thing you can ever buy in your life and the best time to buy an exotic car is when it wouldn’t really affect your overall personal net worth. Now… why is that? One of the most common mistakes that vehicle buyers make is falsely identifying their car as an asset when in truth it is often a liability.

While one could easily argue that vehicles are assets because they can put a decent amount of money back into your pocket once sold, on most occasions this is far from the truth. Cars have expenses and just to name a few, that includes fuel costs, repair and maintenance, registration, sales tax, insurance and toll fees. And buying an exotic cars on top of that just multiplies those expenses that can really put young adults and entrepreneurs in a choke hold on their finances.

Now that you learned how cars are liabilities, the importance of how even exotic cars aren’t as important to get early on because that money spent on that car could have been compounded over time if it was placed into an asset that can grow and produce more in the long run.

If you want to learn more about Assets and Liabilities, another really good book I always recommend for anyone to read is “Rich Dad Poor Dad” by Robert Kiyosaki. Heck even Will Smith made his kids read this book too. This book is an easy read and made simple enough so you can understand how the rich play smart and take advantage of building their asset portfolio to make their money. Moving forward with the understanding of assets and liabilities, while it’s very important to budget properly and being a little frugal especially at an earlier stage in life, the reality is down the road.

3. The 3rd financial sin you’ll come across is believing you can just save your way to wealth.

Again, not saying you should go out and blow your money. I think it’s always great to get amazing deals and save as much as you can. But also you won’t see any coupon clippers pulling up in a Walmart parking lot with a Lamborghini. If you do, that’s like seeing a Bigfoot. Now do you have to have a Lamborghini? Of course not. That was a simple example of how with your smart budgeting, out earning your expenses by earning more income is also the other side of the equation in the growth of your net worth.

You should actually start building an asset portfolio because there’s only so much time you can give at a job to earn money, so having a passive income on the side from an asset will be extremely beneficial. This is what I found to be effective. A great start for beginners is to investing 25% of your savings into an asset like into an index fund can be compounded over time. There’s a lot more you can learn about investing through another book you can read called “Unshakeable” by Tony Robbins.

4. The 4th Financial sin is being Unaware of the Cashflow Quadrant.

This is brought up in another book, Cash Flow quadrant by Robert Kiyosaki. And basically the entire economic world is broken up into 4 separate quadrants of how people actually make their money. On the left side you have the E and The S quadrant. The E stands for Employee. 80% of the world make their money by trading their time for dollars, by punching in and out at their company. The S stands of Self-Employed. Their way of making money is by running their own business, but it still requires their time, since they are the heart of the business, and unfortunately if they leave, their business will die off.

The right side of the quadrant we have the B and the I, aka the 20%, and their way of money is different. B stands for Business Owner. They build and invest into assets which over time, it will not require their complete presence and their income is stable and can still climb up. And finally we have I for Investor. Remember how Investing is one of the 4 parts of a financial IQ? The science of using money to make more money? A simple example of this is how in the show ‘Shark Tank’, we see successful business owners who’ve decided to become investors by using their own money to invest into other businesses and products in hopes to make a larger profit in the future.

Understanding the cash flow quadrant can help you realize there’s other ways of making money and can help you transition over to the B and I quadrants. Those shark investors know very well that there will be chances of failures in their investments with other businesses, which brings to the 5th financial sin.

5. Never using failures as stepping stones (Instead takes them as discouragements)

Whether we’re talking about business, athletics, parenting, or relationships, even the most successful people don’t get everything right. Failure is a given on the path to success, but how we deal with failure can significantly impact the level of what we achieve in any endeavor. Tell me. What’s better? Throwing the towel when things start to get hard? Or pushing it through the discouragements and life obstacles by turning all the failures into useful lessons? The truth is that if you’re growing, stretching, and expanding, you will experience failure.

Failure is simply feedback informing us that there is a different or better way. Poor and broke minded people will always disagree, think otherwise, and just give up. How can any broke minded person stop behaving like a broke minded person? That is by avoiding the 6th financial sin which is:

6. Using all your Free Time for entertainment instead of self-development.

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While it’s great to relax and have fun, which I think everyone should be doing once in a while, there will be important priorities that’ll be needed to take care of first if you want to get further ahead of the world. You see, self-development happens in our minds which greatly affects our decisions and habits with our work, businesses and money. By improving and expanding the mind, many successful CEOS and entrepreneurs do that by reading self-development books which many reads an average of 2 self-development books a month. Here are just a few top business leaders and entrepreneurs who make reading a major part of their daily lifestyle:

Bill Gates reads about 50 books per year, which breaks down to 1 per week, Mark Cuban reads more than 3 hours every day Elon Musk is an avid reader and when asked how he learned to build rockets, he said “I read books.” Mark Zuckerberg resolved to finishing a book every 2 weeks. So, you see the similarities? We should never stop learning on how to feed our minds which can improve your business and your knowledge for future applications. But don’t just read anything. Be highly selective about what you read, opting to be educated over being entertained. Those top business leaders and entrepreneurs believe that books are a gateway to success by learning and acquiring useful knowledge.

7. And finally the 7th financial sin is Being afraid of hard work and never taking risks

Risk is all around us all the time. Life is a series of calculated risks. Everything you decide to do has a margin of risk. No outcome is ever 100 percent certain but it pays to make calculated risks to advance your life and career. You see, there are two kinds of people:

1. Those who take pride in security.

They seek stability, affiliation, comfort, work worth doing and the assurance it will be okay.

2. Those who take risks and explore opportunities to make a dent in the universe.

They don’t see failure as an option and embrace every obstacle as the way forward. Honestly, the truth is there is never a perfect time for you to start if you want to launch a project, an idea or show your work. The timing will never be perfect for you to write a book, change your habit, or embrace a new habit can can impact your finances Once you acknowledge this, you will get a lot more meaningful work done every day. And those are the 7 Financial Sins That Will keep you poor.

About Ross

Ross is a Chemical Engineer Blogger. Helps people in his own little way.

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