10 Financial Mistakes To Avoid

It's important to avoid financial pitfalls as much as you save and invest. A wrong money decision could set your goal back by years. I once posted about the bad economic choice I made in the past. Here are 10 other big financial mistakes that I come across all the time:

1. Outwit a quick rich scheme
If we were absolutely honest, quick rich schemes are easily spotted. They tell a story of instant success, and we get greedy. You know there's something wrong with the promise of returns, but you don't want to miss the boat. I even have a friend who did a calculated risk and decided to invest in the scheme with his family members, believing he is not the last one on board.

2. No respect for the value of money
There was a time that I like to buy expensive things and treat my friends because I think money is abundance and shouldn't be held tightly. One day, I was invited to an uncle house in an affluent area filled with antique and precious things. And he Cerita (talks) about how he would not pay RM5 for kuih in a shopping mall. He recognises the value of $1, which is to spend on things that bring higher value in exchange for the time you work.

I learnt a lot that day. There's a perceived value of fiat money, and you get more if you appreciate that value. When I think that RM30 buys me a meal, I might end up spending RM30 for a meal. If I believe that RM10 buys me a lunch, I could find lunch at RM10.

3. Lending money to friends without a good reason
It's hard to get money back from a friend, especially when there's no contract signed. Frustration, disappointment and even anger may result should you choose to lend money to a friend (or relative). I have seen people borrowing money for entertainment purpose and puff, friends becoming enemies. It's better to give what you could to a person in need than to live with the burden and hurt of bad debts. If someone needs to pay medical bills and you want to help, go to the hospital and swap your card instead of handling cash.

4. Overpaying for convenience
I love paying for convenience. The only problem is you tend to get lazy and start paying for more comfort. Valet parking, parking in the tourist area, overpriced water etc. This includes not walking between shops to compare prices. Not googling online to get better deals, no patience to wait for sales.

5. Take unnecessary loans
During the credit flood years in 2012-2014, I took a personal loan just because the interest is lower than a fixed deposit rate. It serves as an alternative to my emergency fund. I have since paid it off the low-interest rate. However, the total interest paid was RM3400++. It's still debatable if the loan was worth taking. What I do know is, life is simpler without loans.

6. Impress stranger so you can't retire
A pastor once said you need to be far to impress and near to impact. That's because we are all human with weakness and it's impossible for us to impress someone that we are close to. Being real is the only way to bring impact to someone life. Lyn's confession, I once bought a Mont Blanc for the case, but I don't write much, it's just something to impress myself. For that impression, I burned a month worth of saving. If you are spending to WOW the people in your life, you need to STOP and rebuild your life inside out.

7. Purchase just-in-case items
Fear, shame or insecurity lead us to buy things that we don't need. When you buy something that you don't plan to use now, you ought to ask what motivates you to keep buying. Are you worrying unnecessarily? There's a never-ending list of just-in-case items, and only the top five or ten should be given priority. Things that I would consider for just-in-case is first aid box, medication and toiletries. You don't need to keep an extra set of towel or tableware.

8. Not keeping good tax records
The risk of not maintaining tax records is getting higher and higher each day with digitalisation. In the past, it's easier to get away if you miss a paper. Today, theoretically, an audit can be done on everyone every year without an auditor. Are you ready for the 4th Industrial Revolution? Put this in your action item - find all your reciepts, scan and file.

9. Buy the wrong insurance or cash policy
An insurance policy is complicated and works like a long-term subscription. It is hard to reverse the damage once you paid a few years of policy and management fees. So read the terms and condition carefully, seek trustable advice if you aren't sure. For example, term insurance is much cheaper compared to cash policy and lower your commitments. You should also consider buying MRTA insurance standalone rather than tied to your property loan, which the bank agent will push because of commission. It will be more expensive but an independent MRTA policy would be transferable when you get a new property.

10. Drink sugared drinks
14.9% of Malaysian are diabetic. That is like one in every six plus half person on the street. This is how much sugar invade our country.  Avoid sugared drinks could be the best advice for both your financial and physical health. Flavoured beverages are generally overpriced, makes you sick and increase your medical bills before you die.  

We don't need to be smart or genius to win the retire early game. The less mistake you make, the safer your financial freedom journey would be.

Are there any other financial mistakes that you think would be disruptive?