This is the fifth and final article in a series titled “Mental Money Mistakes.” What are mental money mistakes? They’re subtle errors in judgement. Basic oversights and miscalculations. As a rule, they tend to be subtle and easy to miss. I don’t mean big mistakes like taking on a bunch of debt, spending more than you can afford, or being too risky with your investments. No, these are the kinds of mistakes just about anyone can make, even if you’re intelligent and hard-working.
In this letter, we will discuss:
“Too many people spend money they haven’t earned … to buy things they don’t want … to impress people they don’t like.” – Will Rogers
It’s been said that men never want to ask for directions. But that’s nothing compared to men (and women) who:
And that’s especially true when it comes to your finances.
You see, it’s not often that you hear the word pride associated with financial matters—but there’s a connection all the same. That’s because it’s very easy to be too prideful when it comes to our money. That’s a shame, because being too proud can be a dangerous mistake to make where your money is concerned, because it can lead to very poor decisions. For instance:
Holding onto Bad Investments for Too Long
Let’s say there’s a particular investment or company out there that you really feel strongly about. You put a lot of money into it, you’ve pinned many of your hopes and dreams on it, and you’ve even bragged about it to your friends. But what happens if the investment turns out to be a bad one?
Sadly, many investors would rather hold onto a losing investment then admit they made a mistake. What all investors must understand, though, is that no one has a perfect track record when it comes to investing, and that making a mistake isn’t the worst thing in the world. What matters is how you react to that mistake.
Spending Money Just to Keep Up Appearances
I’ve seen this happen more times than I can count. Someone wants to buy a sports car or a sailboat just because their neighbor just got one. Someone wants to go on a long, luxurious vacation just so they can post pictures of all the exotic places they’ve been to. Someone wants to join a prestigious club just so they can be in with the “right” people.
Now, there’s nothing wrong with wanting any of these things. But there is something wrong with spending money on those things if you don’t truly want them … or even worse, if you don’t actually have the money to spend. Before you know it, vanity purchases can turn into a habit. And as we already discussed in Mental Money Mistake #2, this type of habit can seriously impact your long-term goals. You know—the stuff you really care about.
Preferring to Be Wrong Than Right, Or Ignorant Than Educated
Whether most men truly hate to ask for directions, I don’t know. But it’s not hard to see why they would. Nobody enjoys admitting they don’t know something, and few people want to ask for help when they feel like they should be able to do something on their own.
But here’s the thing: finances are complicated. In this day and age, there’s so much to know, so much to plan for, so much to be wary of. Unless you want to spend the majority of your time conducting financial research, it just doesn’t make sense to think we can do everything on our own. Even financial professionals like me rely on other experts to help with keeping our affairs in order.
That’s why there’s no shame in asking questions whenever you don’t know something. There’s no shame in seeking advice when it comes time to make an important financial decision. This is how the smartest people achieve success. What’s more, it’s how they stay successful.
In the end, the old proverb “Pride goeth before destruction, and a haughty spirit before a fall” applies to more than just our souls. It applies to our finances, too.
I hope you’ve enjoyed this series on “Mental Money Mistakes.” Remember, no matter how smart or hard-working we are, it’s never too difficult to make a mistake. But as you think about the different kinds of mental mistakes we can make, remember too that the mistake itself is not what really matters.
What matters is how you react to it.