“Financial freedom is available to all those who learn about it and work for it.”— Robert Kiyosaki
In many ways, the path to financial freedom is about avoiding mistakes. Costly mistakes that can derail you.
Here are some common money mistakes you must avoid to create financial freedom:
1. Endlessly comparing yourself to others
“Too many people spend money they earned… to buy things they don’t want… to impress people that they don’t like.” — Will Rogers
The reason the majority of us live from paycheck to paycheck is that we are endlessly comparing our finances to others. This comparison can lead to one of two things:
- Overspending in an attempt to be on the same status as your neighbor who recently bought a brand new 2021 BMW.
- Complacency as you think you’re “better off” than your neighbor who drives a 1989 honda accord.
When you compare, you lose perspective because you only compare based on what you see or think.
You don’t really know how much your neighbor makes. Is she rich or is she living in debt?
You have no idea what his work ethic is. Is he lazy or does he work like a horse?
You don’t know her skill level or talent. Yours may not match up.
Often, you have no clue what values drive how others spend their money. Yet, you compare yourself to them.
Constantly comparing yourself to others and the way they spend their money, whether good or bad, will not pay your bills. It will not add a dollar to your bank account. And it certainly will not give you joy and peace of mind.
It is pointless to put yourself under unnecessary pressure to be like the neighbor next door.
“Too many people allow cultural expectations and other people to dictate their own values and family priorities.” — Rachel Cruze
So, live your own life and resist falling into the trap of letting the way others spend their money dictate the way you spend yours.
If you have to compare, compare yourself to your yesterday’s self and let this drive you and the way you live your life.
2. Regularly spending above your means
“The philosophy of the rich and the poor is this: the rich invest their money and spend what is left. The poor spend their money and invest what is left.” — Robert Kiyosaki
One of the reasons we spend beyond our means is the need to impress others. Often, we want to impress because we’re constantly comparing ourselves to others.
People that successfully achieve financial freedom never try to impress anyone. Rather, they are super focused on their goal to achieve financial freedom.
If you want to drive a fancy car, create the income that can afford it.
If you want to live in a beach house, create the income that can afford it.
There is nothing wrong with living an extravagant lifestyle if that is what you desire and if you can afford it. But there is everything wrong with living an extravagant lifestyle on debt.
So, don’t make the mistake of living beyond your means. As I’ve written in the past, it is important to know your GAP and to make sure it stays positive for the rest of your life.
3. Seeking comfort rather than freedom
“If you want to be financially-free, you need to become a different person than you are today and let go of whatever has held you back in the past.” — Robert Kiyosaki
Seeking comfort leads to complacency. It is the enemy of abundance.
When we’re comfortable, we don’t have the drive to push past our comfort zone. We don’t push for transformation for ourselves and for the transformation of our communities. In some ways, when we seek comfort, we are selfish.
The entire middle class in the western world and in most nations is built on seeking comfort. This is why the middle class will always keep working as money is dependent on their efforts.
Rather than seeking comfort, seek freedom instead. This will drive you to create wealth. And in the process, you will impact many lives and transform communities.
4. Reliance on one source of income
“Never depend on a single income. Make investment to create a second source.” — Warren Buffet
People that are financially free rely on multiple sources of income.
Although you may have one major source of income, never depend on just one source.
Multiple sources of income allow you to fortify your income. When your income source is fortified, your financial freedom is secured.
If you only have employment income as your only source of income. What will happen if you lose your job? That income stream will stop until you find another job.
On your path to financial freedom, you must be regularly investing to create different streams of income, independent of your main source of income.
For example, I invest in real estate to create rental income. I invest in stocks to create dividend income. And I invest in businesses to create active business income.
5. Saving only for the sake of saving
“More people should learn to tell their dollars where to go instead of asking them where they went.” — Roger Babson
Always have a purpose for saving and that purpose must be to redeploying the savings as quickly as possible. To redeploy it to other investments that will generate higher returns.
It is impossible to create real wealth just by saving money. The banks will often pay less than 1% interest on your money if it sits in a savings account. So, it is important to deploy your savings to other investment opportunities.
By constantly investing, you will be engaging in the velocity of money. In the world of finance and economics, the velocity of money is a measurement of the rate at which money is exchanged in an economy.
In Robert Kiyosaki’s book, “Who Took My Money?”, he writes that the velocity of money is one of the reasons why the rich get richer while the average person risks losing a large portion of their savings. According to Robert, to build and accelerate your wealth, you want to:
1. Invest your money into assets
2. Get your money back
3. Keep control of the asset
4. Move your money into a new asset
5. Get your money back
6. Repeat the process
As you can see, the same money is reinvested into assets over and over again. The term velocity is associated with speed. So, how quickly do you want to reinvest? As quickly as possible!
By doing this, you will multiply your savings over time.
6. Constantly chasing what is trending
“It takes twenty years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.” — Warren Buffett
Trends come and go.
So, don’t waste your time, effort, and money on chasing trends. If you do this, you are essentially gambling.
Resist the urge to invest in the latest and greatest technologies that can be displaced by new technological developments.
Rather, invest like Warren Buffett who invests in things that are more or less certain. In electricity, railroads, banks, insurance, soft drinks, food companies, and candy. These things have been around for years and are not likely to go anywhere soon.
7. Trusting blindly without validating
“I don’t trust easily. So when I tell you ‘I trust you’ please don’t make me regret it.” — J. Cole
Trust is vital. Often times in business, we do business with people we like and trust.
The problem is that you trust without verifying. You act on your feelings rather than acting on evidence. As a result, you end up in investments or business relationships that hurt you.
As important as it is to trust, you must be aware that when it comes to important decisions, you must not let our guards down.
Always look for solid evidence and use this to validate your trust. Use this to justify your decision rather than relying on your feelings.
If you are so close to people that you are not willing to ask them to provide evidence, make it a policy not to do business with them.
“Real wealth is not about money. Real wealth is: not having to go to meetings, not having to spend time with jerks, not being locked into status games, not feeling like you have to say ‘yes,’ not worrying about others claiming your time and energy. Real wealth is about freedom.” –James Clear
We all make mistakes. Chances are you’ve already made several of these mistakes on your path to financial freedom.
Now that you are aware of them, I hope you will pay more attention. You can learn from your mistakes and do what is required to avoid making the same mistakes over and over again.
I wish you the best of luck on your path to financial freedom. Enjoy the ride!
P.S. Join my mailing list here to be notified of how you can join my 5-Day 1-hour-a-day challenge starting on July 6. This challenge will reveal many misconceptions and myths about money and financial freedom no matter your income level. At the end of the challenge, you will be super equipped to avoid the many money mistakes you make that prevent you from building and accelerating your wealth! This challenge will put you on the path to financial freedom and help eliminate all your money worries forever!