Making your money work for you is not straightforward, and there are plenty of pitfalls involved in wealth-building that you need to be aware of if you want to move closer to financial independence.
The first step is knowing what mistakes others make so you can avoid them, and we have totted up a few of the biggest snafus that should be on your radar.
Not considering getting expert advice
Over-eager amateur investors can be irresponsible with their cash without even realizing it, and if you are a fresh face on the finance scene then it will take you years of research to truly understand the ebb and flow of the markets.
Lots of people in this situation do not appreciate the advantages that come with talking to a professional advisor, like those at Ridgewood. Experts will be perfectly positioned to look at your current situation, make bespoke suggestions about how to harness your money and extract its true potential over time, while guiding you away from risky options and also breaking you out of bad habits.
Failing to set a sensible monthly budget
The way you spend your money from month to month will have a huge role in determining whether you are able to build wealth over the decades, and yet far too many people do not bother to create a budget for themselves to rein in some of their more irresponsible spending behaviors.
The simple act of looking at how much money you bring in, how much you have to set aside for essentials like food and housing, and how much you have left will let you know what you have to work with. Choosing to save or invest a good chunk of your paycheck, rather than going into the red every 30 days, is a far better strategy.
Ignoring interest rates
It is entirely possible to accumulate wealth while still borrowing money; mortgages are a great example of the kind of debt which it makes sense to take on, for example. However, the size of the debt is less relevant than the amount of interest you are paying on it, and overlooking this aspect could leave you significantly poorer.
Aside from making sure that you get a good rate for your mortgage, and preferably fix it for a set period, it is also necessary to sidestep the temptation to get involved with other high interest examples of debt, such as credit cards. Unless you pay off the balance of your credit card as soon as possible, you could be left with large interest obligations that hound you month after month.
Neglecting to secure insurance
Life can be unpredictable, and insurance is there to cushion the blow when the worst happens. This applies to all sorts of areas, from damage and theft at your home to bouts of ill health that leave you with big medical bills to pay.
So while saving and investing is all well and good, you could find that your nest egg is depleted quickly by any number of costly catastrophes if you do not have adequate insurance to protect it.
The longer you wait to start your wealth-building journey, the more potential opportunities to generate cash will pass you by. If you do not want to suffer from retrospective FOMO, then it is always a good idea to start saving and investing right now; not tomorrow, or next week, or next month, but today.
Of course you should still do your research and get expert advice as suggested, but also remember that procrastination has never helped anyone.
WRITTEN BYClaire Ward