Nothing will blow your financial goals or budget faster than discontentment. Discontentment leads to purchases that are not in the budget. The neighbors redo their landscaping and so now you feel you need to update yours. You were fine with your landscaping until that happened. So now you go out and update your landscaping, which wasn’t in the budget this year.
b. No financial training
I’ve talked about this before and this is a big issue. I never had a single class in school on budgeting, managing a checkbook, debt, etc. Unfortunately a lot of training comes from sales people, not teachers. Most of people learned about purchasing and paying for a car from a car dealer or car lot. We learn how to buying a home from a realtor and mortgage company. Many decisions are made based on input from folks who will profit from the sale of the item. They get paid if you buy, they don’t get paid if you don’t buy. It is hard to get unbiased advice in that situation no ma
c. Impulse buying – using existing resources.
I call this the “I want it now; even if it means I can’t get what I really want later.” This is a trap a lot of folks fall into but they don’t see it as an issue because no debt is directly involved with these purchases. Basically they buy what they want and spend everything. The real issue is that because they are spending all of their money, they do not put money away for bigger ticket items like appliances, cars, and retirement. Because they are not saving for these items they will most likely go into debt at a later time for these items.
d. Impulse buying – using future resources (BORROWING)
I call this the “I want it now. Therefore, I will borrow!” This is called spending more than you make. Anytime you borrow you are taking future income, that you do not know for sure that you will have, to pay for something you will begin using immediately. That involves risk. Another point to this is when you borrow money you pay interest. When you pay interest your money doesn’t go as far. It is like getting a decrease in your income.
e. Not understanding the differences between needs, wants, and desires.
This is another area that will mess up your budget quickly. I like to use a drill as an example. For an individual uses a drill 2-10 times a year, their need can be met by a $30-50 drill. Nothing is gained by buying a more expensive drill since the users doesn’t use it much. Most likely the batteries will go bad before the drill wears out.
For the do-it-yourselfer who uses it almost every weekend, the $30-40 drill will not hold up so they will need to move to a $70-130 drill. They may be tempted to move to the professional grade drill but all that is accomplished is they spent more money for a drill when the $70-130 drill would have met their needs.
For the professional who uses a drill every day, they need a drill in the $130-300 range. None of the two previously mentioned categories of drills will meet their need.
I understand buying quality products. In example above it would make no sense for the individual who uses a drill 2-10 times a year to shell out $300 for a drill. The $300 drill in this case is totally a “desire” and not a “need.” Look around your house and look at the items that you have purchased where you bought “desire” instead of need or even a “want.”
Two other areas where we confuse needs, wants, and desires are with homes and vehicles. Nothing wrong with getting into the “wants” and “desires” as long as it isn’t messing up your overall financial goals.
“Is your current lifestyle getting in the way of your goals?” – Bryan Cooper
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- Six Smart Ways to Help Stop Debt From Getting Out of Control (ally.com)
- 4 things to know before you borrow this summer (confused.com)
- 5 Reasons Your Goals May Have Failed in the Past (myfinanciallifecoach.wordpress.com)
- Single Mom’s Ask Sara Blog– http://www.SingleMomsAskSara.com