Financial Mistakes That Even Experts Make

Financial Mistakes That Even Experts Make

For those just starting out on their own, money can be intimidating. In those first few years, mistakes are just as inevitable as the financial losses that follow a misstep – and as painful as those errors are, they serve as signposts on the road to financial stability.

Even experts who have built their careers around finance have made a few bad calls in their earlier years – and learned from their mistakes.

Here are a few of the errors that they made, along with a few tips for avoiding similar mishaps!  

Trusting Personal Relationships Over Logic

Financially successful individuals don’t cross friendship and business. While agreeing to invest in a close friend’s or even a family member’s business proposal can seem like a fun idea or even just a polite response to being asked, you should decline. More often than not, interpersonal feelings bias you against an objective view of the asker’s business plan, and leaves you poorer in time, money, and friends.

Expert Case Study: When Jacki Zehner, current CEO of Women Moving Millions invested time and energy in getting a friend’s recording studio off the ground, she lost her investment, her friendship, and most significantly – her time.

 

Failing to Review the Fine Print

Contracts can be slippery, and end up costing you far more money in technicalities and rollover costs than you ever expected to pay when you signed. It can be easy to be lulled into complacency after months of regular payments – and costly! Read the fine print, and don’t forget to shop around for better bargains if you feel that you’re paying too much for the service you receive.

Relatedly, make sure to go over your credit card bills and account statements at least once a month to check for fraud. While reconciling bills and accounts can be a pain during busy months, a quick check will catch any unauthorized transactions and potentially save you thousands of dollars.

Expert Case Study:  Justin Modray, founder of Candid Financial Advice, got caught up in a stressful move to a new house and didn’t notice that he’d been swindled out of three thousand pounds until he checked his statement a few months later. He reached out to his bank and managed to get the stolen funds back – but he made sure to regularly reconcile his accounts after the scare!

 

Overspending

Purchases add up. Even a couple of nice dinners and a great deal at that store you love can launch you significantly over budget. Crunch the numbers! Work out how much you need to set aside for bills, savings, and living costs every month, and then decide how much you can afford to spend on fun.

Expert Case Study: Financial author Kate Northrup blew through far more money than she should have when she was in her twenties. She explains her rationale: “I had this idea that I needed to look a certain way and that I needed to look like I had it more together than I did. That, to me, meant spending more money than I actually had because I wanted to look more successful than I actually was.”

As Northrup suggests, real success comes more slowly, and requires patience and financial foresight. Looking well-off only goes so far when you don’t have money left at the end of the month.

Greedy Investments

If it looks too good to be true, it probably is. Stay away from investments that promise quick returns in short periods of time. Not only do such ventures normally crash, but sometimes they can have shady roots! You stand to lose all that you contribute – if not more – by buying into a greedy scheme. Instead, look into more stable, long-term investments.

Expert Case Study: Alex Davies, co-owner of WealthClub, made the mistake of investing almost £20,000 in a minerals company that went under within a year! The nearly double return he received initially slipped through his hands when the questionable firm fell apart. Don’t invest in deals that promise quick returns – they rarely last!

 

While it’s tempting to follow an impulse or make a decision based on emotion, biased or split-second choices will inevitably lead you into financial trouble. It’s vital to keep a level head and learn from your mistakes, regardless of whether you’re a beginner or financial expert!


Ajay Nagpal, the Chief Operating Officer at investment management firm Millennium. Ajay Nagpal supports social entrepreneurship through his work as a Board member of Echoing Green. Please visit his social entrepreneurship blog to learn more about that! Also, find him on Behance!

16 Budget Tips For New Entrepreneurs

16 Budget Tips For New Entrepreneurs - Ajay NagpalBudgeting skills are essential knowledge for anyone managing a business, and this is especially true for new entrepreneurs who are looking to enter the business world on a sturdy leg. Small businesses are no joke, and piloting one means keeping one’s eyes ahead, while always knowing how to gauge your peripherals and keep it from crashing.

While some things go without saying for business leaders, finance and budget tips bear repeating. Look the 16 tips below, which offer some insight on budgeting for your business.

  1. Keep your personal life separated from business finances, which will ultimately help you with your budget. The commingling of personal and business can distort accuracy. You won’t have an accurate estimation of how much money your business grossed or how much it might need to succeed. Payroll is one of the biggest costs that a business has, so you must identify how much it will cost to pay your salary. The use of appropriate budgeting techniques and credit cards will starve off future obstacles.
  2. Don’t forget about your taxes, which is a recurring expense that’s sometimes left out of financial calculations. It’s recommended that you open a separate bank account and deposit 20 percent of gross revenue or up to 35 percent of your monthly net income. Failing to plan ahead for taxes can lead to a late fee or an audit.
  3. It’s important that first-time entrepreneurs, hold on to all of your receipts, and kept them organized. While many first-entrepreneurs take their largest expenses into account, they sometimes fail to account for overtime and smaller costs. Keeping those receipts on hand offers a clear understanding of your budgets and your finances, providing a glimpse into growth-related expenditures.
  4. Lean on your supplier if you feel like prices are a little too steep for you. As long as you’re polite, it doesn’t hurt to try to cut costs. Inquire if you can get a discount if you purchase in bulk or if you can get a discount by paying for supplies upfront.
  5. Always search for the best deal. By investigating your options, you’re more likely to save your business money in the long run.
  6. Understand that loss is on the table, and a good way to make sure that you hold to what you have is to shed some non-essential expenses.
  7. Overestimate your expenses when you’re planning for the future. If you do this, you won’t be devastated if a surprise cost takes you by surprise.
  8. Rather than hiring costly full-time employees, hire freelance writers, designers, and delivery people. Do so means that you’ll save money on training, hiring, and sourcing. Additionally, you’ll save money when it comes taxes, fees, and payroll.
  9. However, when you choose to hire your employees and budget for salary, consider the cost of training materials, insurance, taxes, payroll fees, and additional equipment.
  10. Shop smart and try to buy used furniture, equipment, and electronics, which will cut down on costs. However, don’t skimp on things you need.
  11. Brick-and-mortar locations are attractive, but when you’re starting out as an entrepreneur, it’s important that you notice that rent, furniture, and transportation can cost you thousands. If you sincerely require a physical location, then try working out of your home. You can even receive tax deductions if you opt to operate out of your home-based office.
  12. Use Mint and similar budgeting software to help you analyze, track, and monitor your spending. There are some intuitive and free programs you can use that will aid with online management of cash and spending analysis.
  13. When you’re looking to create a small business, you’ll have to bear your credit in mind, which is important if you’re interested in taking out a loan. Also, if you happen to take out a loan and you’re late with repayments, it could hurt your credit score and your business. Plan loan repayments within the monthly and yearly budget.
  14. Partner with other business professionals and save money on promotion, flyering, and overall advertising. If you split costs, you’re saving money.
  15. Seek out free advertising by reaching out to news publications to cover your events, pumping up your social media presence, and by volunteering at local events where you can advertise your business and connect with potential customers. Joining an industry association can offer you a network, which is great for word-of-mouth, discounts, and finding new ideas.
  16. Insurance is an important expense that’s not worth skipping. Budgeting for insurance before an incident can ultimately save your business.

Ajay Nagpal, the Chief Operating Officer at investment management firm Millennium. Ajay Nagpal supports social entrepreneurship through his work as a Board member of Echoing Green. Please visit his social entrepreneurship blog to learn more about that! Also, find him on Behance!