While people start out with good intentions and set their sights on meeting various financial goals, many never achieve them and instead fail miserably.
Here are nine bad habits that will hinder investors from reaching their financial success.
1. Failing to plan. Lacking a financial plan means you have no focus and you can easily be swayed. A recent study by the University of Scranton revealed that 92 percent of people who do not achieve their goal fail as a result of lack of planning. People who do not plan for how to manage their money and who lack a budget are vulnerable to impulse buying, overspending and making other unwise decisions. You may be earning a lot of money, but failure to plan will derail you from your set objectives.
Prepare a budget that outlines every financial expense you have. Having a list will guide your actions and restrict those that are unfavorable. In case you make an inevitable decision that was not part of the budget, you will know about it and evaluate how to address it. The plan will also teach you accountability and point out areas where you are deviating. It will also indicate your progress or performance.
2. Setting unrealistic goals. Most people have unsuitable goals for their financial journey to success. Their goals are either vague, too broad or exaggerated with no timeline. Setting unrealistic goals will demoralize you, especially in this era, where young people prefer duplicating celebrity lifestyles and lavish spending.
Today young people below the age of 35 are living on a tight budget. They are called “Generation Squeeze.” They have low income and are under a prolonged economic crisis. They are in debt and struggling with school loans and family difficulties. Another aspect of unrealistic goals is setting standards that are too high, with inadequate time to achieve them.
Evaluate where you are and your intended position financially. Set short-term goals to achieve a long-term objective. Small steps are more practical to achieve, and they motivate you to continue pursuing the ultimate target. Realistic goals entail specificity, a particular timeline and accuracy. Ensure that setting goals is a personal initiative; do not allow anyone to dictate or create the goals for you.
3. Lacking financial literacy. Ignorance is a significant enemy of progress and, in this case, financial success. A large number of people lack financial literacy. They believe financial success is doing things that they have always planned to do; for example, living in the moment. Success has no specific approach; it is a combination of proven methods that you apply according to your personal situation.
Openness to experience is a personality characteristic associated with people who are interested in learning new things and engaging in creativity. Nevertheless, it does not mean people with other personality traits should not seek further information. Knowledge has never been irrelevant, and that applies to financial knowledge. Read books, watch the news and follow closely emerging and trending issues and practices in finances. Also, work with a financial advisor.
4. Impatience. Pursuing success one day does not lead to success the next. Most people begin pursuing their financial goals with high confidence and motivation and are hell-bent on achieving them. But after a while, they may encounter unforeseen challenges and other difficulties that lead to impatience.
Those who become impatient change their goals, which hinders their financial success. Behavioral economist Shlomo Benartzi discourages people from having financial market phone apps, because people who do often make quick and bad decisions when they receive continuous stock updates.
Financial success is a process that takes time. Make sure you make the journey with a financial planner. Create small milestones that you will achieve at a quicker pace. Every time you do so, it will encourage you to further pursue your ultimate goals. Cultivate a culture of patience.