From a very young age, I learned to associate money with freedom. Growing up as an unhappy child, I learned to value of financial security as a means to freedom. This belief led me to become somewhat of a money hoarder, clinging to every dollar as a ticket to personal liberty. During my teenage years, I swayed into a period of rebellion—spending excessively, perhaps as a way to claim a slice of the freedom I so craved. However, I eventually reverted back to my cautious financial habits, embracing minimalism and the peace it brings.
My journey took a professional turn towards finance. In college, I switched my major finance when I realized it was likely more profitable than political science. My career began in a corporate setting at a major bank, where I eventually became engrossed with personal finance, consuming every related book I could lay hands on. This passion sustained me and eventually guided me to apply for and take a lower-paying job as a paraplanner after my team was laid off at my corporate job. Here, I found my true calling. Being an introvert with little interest in bringing in clients, I thrived on strategizing and helping others achieve their financial goals with this more internal role, only meeting with clients to reveal their plan.
Here are 5 MAJOR financial pitfalls I see clients fall into that make my money hoarding self scream inside, along with strategies to avoid/fix them:
- Living Someone Else’s Dream: Many people live lives shaped by others’ expectations or never pause to figure out what they truly want. It’s vital to take time for self-reflection to understand your own dreams and aspirations.
- Unprofitable Investing: Investing in rental properties can seem like a smart move, but it’s crucial to evaluate the profitability realistically. I see many people buy real estate as in investment, make far less than if they put that money in the market, and also spend a lot of time dealing with tenants and maintenance. Another pitfall here is investing in anything that is too safe for the client’s risk tolerance. Many jump into investments that sounds great without actually running the numbers and figuring out if they would be better off with another option. You need to run the number, figure out your risk tolerance, and invest appropriately.
- Relying on Future Inheritances: Planning financial stability around expected inheritances is risky. Many people even spend friviously knowing they will inherit money. Usually they inherit this money and it either less than they thought, or doesn’t carry them as far as they thought it would. It’s important to build independent financial security rather than depending on uncertain future gains.
- Overspending on Children: It’s natural to want the best for your children, but excessive spending can lead to severe debt. I’ve seen people with big money issues who won’t take away their kid’s Mercedes because they want to uphold and image and don’t want their kids (or sometimes spouse) to realize they are broke. Setting realistic budgets and teaching kids about money can help mitigate this issue. Sometimes tough conversations need to happen if you have already dug yourself into a hole.
- Chasing Unrealistic Dreams Without a Plan: Big dreams are wonderful, but without a concrete plan, they remain just that—dreams. Setting incremental goals and realistically assessing financial strategies are crucial to making dreams attainable. You cannot just will a great future, you need to plan for it.
