The path to creating wealth is different for everyone.
Some people get there via strategic property investment, while others achieve financial freedom because of business ownership.
While most financially successful people share similarities, they also make sure they don’t make silly mistakes that could damage their financial goals.
So, here are five financial mistakes it pays to avoid.
1. Not keeping to a budget
If you want to take control of your money, you need to know where it's going and plan in advance how to spend it.
Bottom line: You need a budget that works for you.
Financially successful people not only create a budget, but they also keep to it like money glue.
They have funds set aside for all regular expenses as well as savings for unexpected ones, too.
They also adopt a life-long strategy to ensure they can invest their additional funds into income-earning assets.
That strategy is simply spending less than they earn – day after day.
Not keeping to a budget is a bit like driving your car without ever looking at the fuel tank – sooner or later you will run out of gas!
2. Spending too much
The trick is to spend less than you earn – otherwise, you'll always owe someone money!
You’ll be amazed how much you spend on things you don’t need to impress people you don't like and who probably don't even care.
Changing your habits even a little can make a big difference over time.
3. Not seeking out better deals
Far too many Australians remain loyal to their bank from the start of their working lives until their retirement.
The thing is, such loyalty rarely pays dividends.
This is especially true for property investors, who should work with mortgage brokers from the outset to see which lender is the right one for them.
They should also regularly review their portfolios, including considering refinancing if better deals are on offer.
By regularly seeking out the best deals, your journey to financial freedom can be shortened.
4. Not protecting your assets
Another common financial mistake is not protecting your assets.
Of course, no one likes to think about dying but as you grow wealth, you must protect it.
Now, this can be via regular property insurance, including landlord insurance policies, but it should also include insurance for you personally.
Remember... your future income earning capacity is probably your biggest asset so should be insured.
What I’m talking about is income protection, trauma and life insurance, which will protect your assets during times of ill health or will help to ensure the wealth you created in your lifetime is passed on to the next generation.
5. Not having emergency funds
The vast majority of people live from one pay cheque to the next.
If an unexpected expense arises, they are usually scrambling to come up with the funds or have to rely on their credit cards to pay for it.
Likewise, if they suddenly lose their job, they are potentially in dire straits indeed.
n the other hand, financially savvy people always have emergency funds set aside to pay for large medical bills, for example, or which will see them through several months of no income if needed.
The reality is that you can't predict everything.
For this reason, when you create your budget, include a small "slush fund" that could cover those unexpected repairs or surprise bills.
6. Not thinking about the future
One of the simplest ways to create wealth is to plan for tomorrow today.
That means, creating a financial plan from the start of your working life so you have a roadmap to follow.
That plan will also include ways to supercharge your wealth, including the purchase of investment-grade properties throughout your 20s, 30s, 40s and 50s.
Taking action today will give your portfolio time to mature at the same time as you do!
That will mean by the time you’re nearing retirement age, your financial position is superior to most because of the capital growth in your portfolio.
Then you can retire early, if you so wish, or continue working because you want to – not because you have to.
