The Ten Most Common Money Mistakes

1. Procrastination.
This is the biggest money mistake of all by putting off what should have been done yesterday till tomorrow. This is simply financial suicide on the installment plan.

2. Failure to Establish a Plan.
People do not plan to fail – they simply fail to plan. They fail to set specific objectives and implement a workable plan for realizing those objectives.

3. Ignorance of the Time Value of Money.
Most people do not understand the tremendous potential of compounding money over a period of time. It amazes most people to learn that $10,000 invested every year, earning 10% interest, can grow to more than $25,000 in ten years.

4. Failure to Recognize the Impact of Inflation.
Inflation reduces the purchasing power of dollars over time. The purchasing power of $100,000 ten years down the road is only $55,839 at an inflation rate of 6 percent.

5. Lack of a Clear Understanding of Tax Laws.
Income tax can be substantially reduced through effective tax planning. Understanding implications of tax laws can result in fewer Ringgit making the one-way trip to IRB.

6. Failure to Diversify Investment Portfolio/Taking Unnecessary Investment Risks.
Each individual must determine his degree of risk tolerance and formulate a balanced and diversified investment portfolio.

7. Inadequate Protection Against Unforeseen Losses.
Life, home, health, disability, liability and other forms of insurance are mandatory today to protect against unforeseen and catastrophic losses.

8. Letting Family Spending Run Wild.
Lack of discipline in spending habits can cause even the best-laid plans to fail.

9. Unrealistic Expectations.
It takes time to build wealth and hence an estate. Too many people expect dramatic results too fast and become disenchanted when get-rich-schemes do not materialize.

10. Failure to Use professional Advisers.
None on us can expect to live long enough to become expert at everything, especially the intricacies of efficient financial planning. We need to surround ourselves with professionals who are specialists in their areas and rely on a qualified financial consultant to coordinate the efforts of the entire financial team.

Client :
Springfield consultancy SDN. BHD.
Illustration of Springfield Newsletter April 2007