Diamond Bar Lawyer Reports On: “Financial Mistakes Hidden in Plain Sight
"The men who succeed are the efficient few. They are the few who have the ambition and will power to develop themselves." – Robert Burton
In the course of our daily work around here, we not only work with legal documents a LOT … but we also get a regular course, via those documents, on how people (our clients, mostly) have arrived to the place where they actually have something to *protect*.
In short, we get to be around a great many accomplished families.
So, maybe it’s funny to you, but I like to pay attention to the hidden lessons I can learn from my clients, and from people of means around the country. And, I’ve discovered a few things along the way about what keeps people from the kind of accomplishment and means which they are looking for.
So I’ve decided to channel my inner Suze Orman today and deliver some advice which isn’t the "same old, same old" — and which can help you think about how you’re handling your finances a little differently. Even many of my clients make some of these mistakes … and they can hurt you.
Especially because we hardly ever think about them.
Rowel Manasan’s
"Straight Talk" Personal Strategy
Hidden Financial Mistakes … And How To Fix Them
You pay your bills on time. You try to save as much as you can. You even follow the advice which you read in books and hear on the radio about how to keep your finances in check.
But you’re still not getting ahead.
Well, sometimes, it’s the unchallenged assumptions about how we’re handling our money which rise up and bite us in the keister.
So, in the course of working with clients, I’ve identified some mistakes I see (as well as ones I’ve made myself!), which can be fixed. All it takes is thinking a little differently…
Hidden Mistake #1: Inappropriate Mental Accounting
Definition: Tendency for families to divide money into separate accounts based on subjective criteria.
Typical Example: Treating $100 you received as a gift from Grandma, differently than a $100 bill earned.
Typical Example #2: Having money languishing in a savings account earning 0.25%, while carrying high-interest debt to pay off at 12%.
Cure: Funnel income, no matter the source, into one savings account.
Any "found money", such as a tax refund or gift from Grandma, quickly decide where that money is best utilized.
As for expenses, occasionally change how you pay. If you always pay with a credit card, try cash. This will get you remembering that all of it, for the purposes of your mental "books", should be lumped into one, monthly bucket.
Hidden Mistake #2: Manipulative Price Anchoring
Definition: Our tendency to relate the value of a purchase to a price point which, rationally, should have no bearing on the amount spent.
Typical Example: The "rule of thumb" to spend two months’ salary on an engagement ring.
Typical Example #2: A realtor will tell you that "in 2007 this house was going for $500,000 and is now listed at only $350,000!" … causing you to think this house is undervalued.
Cure: For big ticket purchases like a house, car, or engagement ring, ask a friend whose financial values you respect for their input.
For everyday purchases, avoid looking at the MSRP or sticker price.
Ask yourself:
Can I afford this today?
What do I really want to spend?
What is this really worth to me?
Marketers are experts at this sort of price-anchoring, and we really should know better … but yet we still fall prey to it. Try not to let outside sources set up the comparison by which you should be considering such large purchases.
I think I have a couple more up my sleeve, but I’ll save those for next week. But let me know: is this helpful to you? And what more could we do for you, to help?
To You and Your Family’s Peace of Mind!
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